Suppose that there are 10 firms in an industry, each accounting for 10 percent of industry sales. Two of these firms decide to merge. Which of the following statements about the impact of this merger is (are) INCORRECT?
A) The merger causes the four-firm concentration ratio to increase from 40 to 50.
B) The merger causes the HHI to increase by 100.
C) The merger will not change the HHI unless the industry's sales increase.
D) Both answers A and C are incorrect.

Question

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The Answer of Suppose that there are 10 firms in an industry, each accounting for 10 percent of industry sales. Two of these firms decide to merge. Which of the following statements about the impact of this merger is (are) INCORRECT?
A) The merger causes the four-firm concentration ratio to increase from 40 to 50.
B) The merger causes the HHI to increase by 100.
C) The merger will not change the HHI unless the industry's sales increase.
D) Both answers A and C are incorrect.

Suppose That There Are 10 Firms in an Industry, Each