Why are horizontal mergers more likely to be opposed than vertical and conglomerate mergers?
What will be an ideal response?
A horizontal merger merges two firms in the same geographical market, reducing the number of independent firms in an industry. This kind of merger has a potential to significantly decrease competition in the industry and thus is the most watched of the three main kinds of mergers.
A vertical merger has less potential to decrease competition because it merges two separate industries. Even though this combines firms that are at different stages of the same production of a product, it doesn’t actually reduce the number of firms in each of the merged markets and thus competition is not significantly reduced. The same is true for conglomerate mergers, which merge firms in two unrelated industries. The number of firms in each industry remains the same, so competition remains relatively unchanged. Thus, the government is less concerned with these two kinds of mergers.
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Economists who support market-based reforms for health care believe that increased competition among providers of health care would ________ costs and ________ economic efficiency
A) increase; increase B) decrease; increase C) increase; decrease D) decrease; decrease
Refer to Scenario 17.3. Moral hazard arises in this situation because once the firm
A) pays the premium that is based on the 0.001 probability, it has no incentive to spend the additional $80 for the fire protection program, so the true probability of loss is no longer 0.001. B) pays the premium that is based on the 0.01 probability, it has no incentive to spend the additional $80 for the fire protection program, so the true probability of loss is no longer 0.01. C) puts the fire protection program in place, it has less incentive to spend $300 for a premium, leaving the firm underinsured. D) puts the fire protection program in place, it has less incentive to spend $6,000 for a premium, leaving the firm underinsured. E) puts the fire protection program in place, it will consider that a substitute for insurance and not be able to deal with the loss from a fire should it occur.
Since price tends to equal total utility, the price of water is low and the price of diamonds is high
a. True b. False Indicate whether the statement is true or false
Crowding out results when an increase in government spending leads to declines in consumption, investment, and/or net exports
Indicate whether the statement is true or false