Question

QUESTION 13

Which of the following is NOT a common motivating factor for mergers?

	A.	The widening of markets.
	B.	The search for efficiency.
	C.	The welfare of humankind.
	D.	The quest for market power.

10 points   

QUESTION 14

According to Williamson's analysis, which of the following has the potential to offset the deadweight loss attributable to a merger, such that the merger may actually be welfare improving?

	A.	Antitrust regulators' provisions.
	B.	Cost savings (or "synergies").
	C.	Benevolence of the merging parties.
	D.	Magic spells.

10 points   

QUESTION 15

Which of the following is, on average, NOT true of horizontal mergers?

	A.	The cost savings expected to accrue to the merged entity are typically offset to a large degree by transition expenses.
	B.	Shareholders in the target firm tend to gain value as the result of a merger, reflecting the premium paid by the acquiring firm.
	C.	The merged entity tends to have better overall performance.
	D.	Prices tend to go up as a result of horizontal mergers due to the increase in market power, even in differentiated products markets.

Need simple explanation.

Answer 1

Q13.

Answer: C

Merger is the process of bringing together for mutual success. Firms used to merge together not because of welfare purpose, but to earn benefit out of it.

Therefore, this is done because of a search of wider market (1^st option), efficiency (2^nd option), and increasing market power (4^th option); but not because of human welfare.

Q14.

Answer: A

Provisions relating to Antitrust must be discretionary; it means all the proposals must be checked thoroughly so that the competition could be healthy in the market and welfare could be established by eliminating deadweight loss.