Suppose an industry consists of five equal-sized firms. Two of the firms plan to merge. The merger ______________ raise anti-trust concerns at the Justice Department given that the Herfindahl index before the merger was _____________ and the merger would cause the Herfindahl index to rise by __________.

Question

Quizplus · Accepted Answer

The Herfindahl index is a measure of market concentration, and a merger that significantly increases this index, especially from a level already above 1,800, would likely raise anti-trust concerns.

Suppose an Industry Consists of Five Equal-Sized Firms