Suppose that an industry has a Herfindahl-Hirschman index of 2,000 . Two firms have proposed a merger. Firm A has a current market share of 9 percent. Firm B has a market share of 5 percent
Will the Justice Department challenge the merger? Explain.
The merger will raise the Herfindahl-Hirschman index by 90 points [(142) - (92) - (52)]. Since the industry is concentrated, the Justice Department will challenge any merger that increases the index by more than 50 points. Therefore, the merger will be challenged.
You might also like to view...
According to the text, economists consider full employment to occur when
A) the sum of frictional unemployment and structural unemployment equals zero. B) the unemployment rate consists of only frictional and structural unemployment. C) frictional unemployment equals zero. D) everyone who wants a job has a job.
Identify the cause and the effect in the following examples:
a. Lower infant mortality and an improvement in nutrition b. A surge in cocoa prices and a pest attack on the cocoa crop that year