What Is a Possible Advantage of a Horizontal Merger for the Economy

question 20

Multiple Choice

What is a possible advantage of a horizontal merger for the economy?

• A)The merging firms could avoid losses.
• B)The merged firm might reap economies of scale which could translate into lower prices.
• C)The degree of competition in the industry will be intensified.
• D)The government stands to collect more corporate income tax revenue.

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Definitions:

Perfectly Competitive

A market structure characterized by many buyers and sellers, homogeneous products, and free entry and exit, which leads to an efficient allocation of resources.

Market Wage

The prevailing rate of pay for workers in a particular labor market, job, or industry.

Perfect Competitor

A theoretical market situation in which no individual buyer or seller has the power to influence market prices.

Demand Curve

An illustrated chart that depicts how the demand for a product varies with changes in its price.