Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

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With fewer firms in the market, the market becomes less competitive, leading to reduced output and higher prices due to decreased competition and potential collusion among the remaining firms.

Suppose a Market Is Initially Competitive with Many Firms Selling