week 5 - Under what circumstances and why would the...

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Under what circumstances, and why, would the government be opposed to a merger of two firms? How does the Justice Department decide which mergers to challenge? The government would regulate merging firms because they could create a monopoly system in the business world. In effect they would be affecting American business and the American people because they would have no higher system to regulate how they price things. By doing this, the business could sky rocket the prices they charge and not have to worry about another competitive business knocking them out of the running. It would almost seem illegal to do this, which is why the government opposes such acts. According to the book the Justice Department uses the “Herfindahl-Hirschman Index (HHI) to determine the sales concentration in an industry and the legality of a merger,” (Micro Econ 2, 2010). The higher the HHI the more monopolistic the market is.
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week 5 - Under what circumstances and why would the...

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