A government allows the merger of two large firms in the same industry. With the help of a diagram, evaluate the view that this merger should not have been allowed. Section C Answer one question. EITHER

Economics

IGCSE&ALevel

CAIE

Exam No：9708_w23_qp_41 Year：2023 Question No：3

Answer:

Knowledge points:

7.6.1 perfect competition and imperfect competition: monopoly, monopolistic competition, oligopoly, natural monopoly

7.6.2 structure of the listed markets as explained by number of buyers and sellers, product differentiation, degree of freedom of entry and availability of information

7.6.3.1 legal barriers

7.6.3.2 market barriers

7.6.3.3 cost barriers

7.6.3.4 physical barriers

7.6.4.1 revenues and revenue curves

7.6.4.2 output in the short run and the long run

7.6.4.3 profits in the short run and the long run

7.6.4.4 shutdown price in the short run and the long run

7.6.4.5 derivation of a firm’s supply curve in a perfectly competitive market

7.6.4.6 efficiency and X-inefficiency in the short run and the long run

7.6.4.7 contestable markets: features and implications

7.6.4.8 price competition and non-price competition

7.6.4.9 collusion and the Prisoner’s Dilemma in oligopolistic markets, including a two-player pay-off matrix

7.6.5 definition and calculation of the concentration ratio

7.7.1 reasons for different sizes of firms

7.7.2 internal growth of firms: organic growth and diversification

7.7.3.1.1 horizontal

7.7.3.1.2 vertical (forwards and backwards)

7.7.3.1.3 conglomerate

7.7.3.2 reasons for integration

7.7.3.3 consequences of integration

7.7.4.1 conditions for an effective cartel

7.7.4.2 consequences of a cartel

7.7.5 principal–agent problem arising from differing objectives of shareholders/owners and managers

A government allows the merger of two large firms in the same industry. With the help of a diagram, evaluate the view that this merger should not have been allowed. Section C Answer one question. EITHER

Answer:

Knowledge points:

Solution:

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