View the step-by-step solution to: Suppose that two firms in an industry that has a Herfindahl index

Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely:

ignore this merger because of the relatively small size of, and increase in, the Herfindahl index.
prevent the merger, contending that it violates the Clayton Act.
allow the merger if foreign entry to the industry is possible.
allow the merger but watch the new firm carefully for future violations of the antitrust laws.

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