According to current Justice Department guidelines, mergers in an industry are seldom challenged if the industry
A)would have a postmerger Herfindahl index greater than 1, 800
B)would have a postmerger Herfindahl index less than 1, 000
C)has a premerger Herfindahl index greater than 1, 800
D)has a premerger Herfindahl index less than 1, 000
E)has a premerger Herfindahl index equal to 10, 000

Question

Quizplus · Accepted Answer

According to current Justice Department guidelines, mergers in an industry are seldom challenged if the industry would have a postmerger Herfindahl index less than 1,000. The Herfindahl index measures the concentration of market power in an industry, and a lower index indicates more competition in the industry. Therefore, a postmerger index that is below 1,000 suggests that the industry will still have a reasonable level of competition after the merger, and the Justice Department is unlikely to challenge it.

According to Current Justice Department Guidelines, Mergers in an Industry