Which Two Factors Make Regulating Mergers Complicated

question 129

Multiple Choice

Which two factors make regulating mergers complicated?

• A)First, firms may lobby government officials to influence their decision to approve the merger. Second, by the time the government officials reach a decision regarding the merger, the firms often decide not to merge.
• B)First, the time it takes to reach a decision to approve a merger is so long that the firms often have new owners and managers. Second, by law, government officials are not allowed to consider the impact of foreign trade (exports and imports)on the degree of competition in the markets of the merged firms.
• C)First, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice must both approve mergers. Second, the concentration ratios that are used to evaluate the degree of competition the merged firms face are flawed.
• D)First, it is not always clear what market firms are in. Second, the newly merged firm might be more efficient than the merging firms were individually.

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Definitions:

External Cost

An external cost, or negative externality, refers to a cost that a transaction or activity imposes on parties who are not involved in the transaction, such as pollution affecting non-participants.

Positive Externality

A benefit that affects someone who did not choose to incur that benefit, often leading to an under-provision of a good or service.

Vaccination

A medical intervention that introduces a substance to stimulate the body's immune response against disease.

Producer Surplus

The discrepancy between what sellers are prepared to take for a product or service and the actual payment they get in the marketplace.