Question

The UPP statistic measures _______ a the relative difference between the profit-maximizing price and the costs...

The UPP statistic measures _______

a the relative difference between the profit-maximizing price and the costs faced by the firm

b the amount of product that is diverted from one firm to another after a price increase

c a firm’s inclination to raise price after a merger

d the degree to which market concentration affects the decision-making process of antitrust authorities

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Answer #1

The UPP statistics measures

C) a firm's inclination to raise price after a merger.

Explanation: UPP (upward pricing pressure) is a tool with which it is possible to estimate the risk of merger giving rise to unilateral effect. Unilateral effect may result from a merger between X and Y because customer that will switch between X and Y in response to price increase are, post merger , internalized by the merged identity. This may also give merged identity an incentive to increase price.

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