The merger of two firms producing goods that are complements:
A)is usually not encouraged by the competition authority.
B)the quantity produced by each firm will go down.
C)the consumer's surplus decreases.
D)each firm's profit will rise.

Question

Quizplus · Accepted Answer

The merger of two firms producing complements is likely to result in an increase in each firm's profit. The merged entity can capture a larger share of the market and benefit from economies of scale. The prices may also go down, which increases consumer surplus. However, the competition authority may scrutinize the merger to ensure that it does not create a monopoly or reduce competition in the market.

The Merger of Two Firms Producing Goods That Are Complements