The most common form of merger(s) in the U.S. economy is

 The most common form of merger(s) in the U.S. economy is (are)

a.the horizontal merger

b.the vertical merger

c.the conglomerate merger

d.horizontal and vertical mergers (equally common)

e.horizontal and conglomerate mergers (equally common)

42.              The principal reason why two firms would form a conglomerate merger is to

a.increase the concentration in the industry

b.reduce the concentration in the industry

c.reduce dependency on buyers and thereby have greater control over price

d.diversify assets

e.achieve monopoly control

43.              The type(s) of merger(s) that directly increase(s) concentration in an industry is (are)

a.horizontal

b.vertical

c.conglomerate

d.both vertical and horizontal

e.both vertical and conglomerate

44.              A cartel

a.consists of two firms that collude to eliminate product differentiation so that they can
sell their goods as identical goods

b.is a group of firms that collude to limit competition within their market

c.refers to the breakup of a firm into two or more firms where each produces a good
that does not compete against the others

d.is a government-supported merger of two or more firms to improve the nation’s
advantage in international trade

e.is an illegal merger of two firms that produce unrelated goods

45.              Why do firms collude to become a cartel?  Because it allows them to

a.develop innovations without the threat of competition within the industry

b.compete in order to increase market share

c.act like a monopoly

d.diversify their markets without fear of losing market share

e.increase their own individual concentration ratio

46.              Collusion among firms to form a cartel refers to

a.joint ventures in producing new goods, such as France and England colluding to
produce the European Airbus as a viable competitor to the U.S. Boeing’s 747

b.joint ventures between business and government, such as the exploration of space

c.joint ventures between a domestic firm and a foreign firm, such as in the mega-
movies of the entertainment world

d.the practice among firms of preventing other firms from entering the industry

e.the practice among firms of agreeing to abide by the group decision on price and
output

47.              The formation of cartels is primarily a concern in the __________ market structure(s).

a.perfectly competitive

b.monopolistically competitive

c.oligopoly

d.monopoly

e.perfectly competitive and monopolistically competitive

48.              Cartels in the United States are

a.legal if price is competitively arrived at

b.legal if all firms in the industry agree to the terms of the cartel

c.legal if all conditions of the cartel are made public

d.legal if economic profit earned by the cartel is evenly distributed among the cartel
members

e.illegal

49.              The text refers to OPEC as a classic example of a cartel. OPEC is a group of countries that
                            collude to control prices and output in the _______ industry(ies).

a.agriculture

b.engineering and computer

c.airline

d.oil

e.machinery

50.              All evidence points to the fact that firms’ market power within an industry and industry
                            concentration ratios are

a.directly related, that is, firms’ market power is high when concentration ratios are
high

b.inversely related, that is, firms’ market power is low when concentration ratios are
high

c.totally unrelated, that is, they are directly related in some industries and indirectly
related in others

d.only moderately related, depending on the degree of competition in the industry

e.low for monopoly and high for perfect competition