When will reduced competition through merging of companies raise social welfare
A)when the cost from the synergies exceeds the benefit of increased market power
B)when the benefit from the synergies exceeds the social cost of increased market power
C)under all circumstances
D)under no circumstances

Question

Quizplus · Accepted Answer

Reduced competition through merging of companies may raise social welfare if the benefit of synergies resulting from the merger exceeds the social cost of increased market power. Synergies are the benefits of cost savings, economies of scale, and increased efficiency that result from combining the operations of two companies. However, increased market power resulting from reduced competition may lead to higher prices, reduced innovation, and lower quality, which can harm consumers and society. Therefore, merging companies can raise social welfare only when the benefits of synergies outweigh the social cost of increased market power.

When Will Reduced Competition Through Merging of Companies Raise Social