Suppose that two firms in an industry that has a Herfindahl index of 2,000 announce a merger. The U.S . Justice Department concludes the merger will boost the index to 2, 200. The antitrust authorities will most likely Multiple Choice ignore the merger. allow the merger, but strictly regulate the prices set by the new combined firm. prevent this merger because of the relatively large size of, and increase in, the Herfindahl index. allow the merger, but only if foreign entry to the industry is possible.

Suppose that two firms in an industry that has a Herfindahl index of 2,000 announce a merger. The U.S . Justice Department concludes the merger will boost the index to 2, 200. The antitrust authorities will most likely Multiple Choice ignore the merger. allow the merger, but strictly regulate the prices set by the new combined firm. prevent this merger because of the relatively large size of, and increase in, the Herfindahl index. allow the merger, but only if foreign entry to the industry is possible.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Give explanation of the correct option and explanation of the incorrect options. Note: Hand written solutions are strictly prohibited

Suppose that two firms in an industry that has a
Herfindahl index of 2,000 announce a merger. The U.S
. Justice Department concludes the merger will boost
the index to 2, 200. The antitrust authorities will most
likely Multiple Choice ignore the merger. allow the
merger, but strictly regulate the prices set by the new
combined firm. prevent this merger because of the
relatively large size of, and increase in, the Herfindahl
index. allow the merger, but only if foreign entry to the
industry is possible.

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Step 1: Evaluate merger options.

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Step 2: Assess increased HHI impact.

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Step 3: Prevent merger due to HHI increase.

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