Reduced competition through merging of companies will raise social welfare

Question

Quizplus · Accepted Answer

If the benefit from the synergies, i.e. combining the strengths and resources of two companies, exceeds the negative impact of increased market power such as higher prices and reduced choice for consumers, then the merger can be beneficial for social welfare. However, if the negative effects outweigh the benefits, then the merger may harm competition and reduce social welfare. Therefore, it depends on the specific circumstances and should be carefully evaluated.

Reduced Competition Through Merging of Companies Will Raise Social Welfare