A horizontal merger between two firms occurs when:
A) the products of the merging firms were not related in any manner before the merger.
B) one firm is a producer of products, and the other firm is a producer of services.
C) one firm is a domestic firm, and the other is a foreign company.
D) the firms stood in a buyer-seller relationship before the merger.
E) the merger partners were competitors.

Question

Quizplus · Accepted Answer

A horizontal merger is a merger between two firms that were competitors before the merger. This type of merger is typically done to increase market power and efficiency by eliminating competition. Choice A is incorrect because the products of the merging firms must be related for it to be considered a horizontal merger. Choice B is incorrect because the type of product or service being produced does not determine whether a merger is horizontal or not. Choice C is incorrect because the domestic or foreign nature of the firms does not determine whether a merger is horizontal or not. Choice D is incorrect because a buyer-seller relationship does not necessarily indicate a horizontal merger.

A Horizontal Merger Between Two Firms Occurs When