Question

What is the difference between a horizontal merger and a vertical merger? A horizontal merger is a merger A. between firms of different sizes, while a vertical merger is a merger between firms of the same size. B. that would increase efficiency, while a vertical merger is a merger that would decrease efficiency. C. between firms in the same industry, while a vertical merger is a merger between firms at different stages of the production of a good. D. between firms that have market power, while a vertical merger is a merger between firms that are price takers. E. between firms in different industries, while a vertical merger is a merger between firms in the same industry. Which type of merger is more likely to increase the market power of a newly merged firm? __________ mergers are more likely to increase market power.

Answer 1

A) A horizontal merger is a merger between firms in the same industry while a vertical merger is a merger between firms at different stages of production of a good.

B) Horizontal mergers are more likely to increase the market power of the newly merged firm.

Step-by-step explanation:

A) A horizontal merger is a type of merger which takes place between businesses that sell the same type of product. It can also be described as the coming together of two or more companies that manufacture similar products, this is done to reduce the amount of competition in the market, share different types of skills that can boost the amount of profit incurred, increase the rate of expansion.

A vertical merger is a merger that exists between two of more organisations that manufacture products which are not alike in any way. The main objective of this merger is to lower the cost of production.

B) Horizontal mergers have the tendency to increase the market power by causing a decline in the amount of companies that are competing for the same product in the market.