1.In the advanced widget industry, there are 10 firms, each with the same market share. Two of the firms are contemplating a merger. What is the likely antitrust action, and which U.S. federal regulatory agency is responsible for taking any action deemed necessary?

A)   Possible challenge; Federal Trade Commission.

B)   Certain challenge; Federal Trade Commission.

C)   Possible challenge; Commerce Department.

D)   Certain challenge; Commerce Department.

2.There are 12 firms in an industry, 10 of them have a market share of 7 percent each, and 2 of them have a market share of 15 percent each. If 2 of the 7 percent market share firms agree to merge, calculate the pre- and post-merger Herfindahl-Hirschman Index, and evaluate the likelihood that the merger will be challenged on antitrust grounds.

A)   Pre-merger HHI = 940; Post-merger HHI = 1038; Possible.

B)   Pre-merger HHI = 833; Post-merger HHI = 972; Unlikely.

C)   Pre-merger HHI = 940; Post-merger HHI = 1038; Unlikely.

D)   Pre-merger HHI = 833; Post-merger HHI = 1250; Possible.

3.The three broad index value categories for the post-merger competitiveness of an industry, based upon the Herfindahl-Hirschman Index, are:

A)   Less than 1000, between 1000 and 2000, and greater than 2000.

B)   Less than 900, between 900 and 1800, and greater than 1800.

C)   Less than 500, between 500 and 1000, and greater than 1000.

D)   Less than 1000, between 1000 and 1800, and greater than 1800.

4.There are 6 firms in a given industry, each with an equal market share. Suppose that 2 of the firms decide to merge. Calculate the pre- and post-merger Herfindahl-Hirschman Index, and evaluate the likelihood that the merger will be challenged on antitrust grounds.

A)   Pre-merger HHI = 1673; Post-merger HHI = 2503; Virtually certain.

B)   Pre-merger HHI = 1673; Post-merger HHI = 2224; Possible.

C)   Pre-merger HHI = 1673; Post-merger HHI = 2224; Virtually certain.

D)   Pre-merger HHI = 1673; Post-merger HHI = 2503; Possible.

答案和详解如下：

1.In the advanced widget industry, there are 10 firms, each with the same market share. Two of the firms are contemplating a merger. What is the likely antitrust action, and which U.S. federal regulatory agency is responsible for taking any action deemed necessary?

A)   Possible challenge; Federal Trade Commission.

B)   Certain challenge; Federal Trade Commission.

C)   Possible challenge; Commerce Department.

D)   Certain challenge; Commerce Department.

The correct answer was A)

Before the merger, the HHI is 1000. After the proposed merger, the HHI would be 1200. The value and the magnitude of the change indicate that a challenge is possible, but not certain. The Federal Trade Commission, along with the Department of Justice, is responsible for reviewing and approving/challenging proposed mergers.

2.There are 12 firms in an industry, 10 of them have a market share of 7 percent each, and 2 of them have a market share of 15 percent each. If 2 of the 7 percent market share firms agree to merge, calculate the pre- and post-merger Herfindahl-Hirschman Index, and evaluate the likelihood that the merger will be challenged on antitrust grounds.

A)   Pre-merger HHI = 940; Post-merger HHI = 1038; Possible.

B)   Pre-merger HHI = 833; Post-merger HHI = 972; Unlikely.

C)   Pre-merger HHI = 940; Post-merger HHI = 1038; Unlikely.

D)   Pre-merger HHI = 833; Post-merger HHI = 1250; Possible.

The correct answer was C)

The pre-merger HHI = 940 = ((7x7x10) + (15x15x2)), the post-merger HHI = 1038 = ((7x7x8) + (14x14x1) + (15x15x2)). Since the change is less than 100, a challenge is unlikely.

3.The three broad index value categories for the post-merger competitiveness of an industry, based upon the Herfindahl-Hirschman Index, are:

A)   Less than 1000, between 1000 and 2000, and greater than 2000.

B)   Less than 900, between 900 and 1800, and greater than 1800.

C)   Less than 500, between 500 and 1000, and greater than 1000.

D)   Less than 1000, between 1000 and 1800, and greater than 1800.

The correct answer was D)

The three broad value categories for the post-merger competitiveness of an industry, based upon the HHI index are less than 1000 (competitive), between 1000 and 1800 (moderately concentrated), and greater than 1800 (highly concentrated).

4.There are 6 firms in a given industry, each with an equal market share. Suppose that 2 of the firms decide to merge. Calculate the pre- and post-merger Herfindahl-Hirschman Index, and evaluate the likelihood that the merger will be challenged on antitrust grounds.

A)   Pre-merger HHI = 1673; Post-merger HHI = 2503; Virtually certain.

B)   Pre-merger HHI = 1673; Post-merger HHI = 2224; Possible.

C)   Pre-merger HHI = 1673; Post-merger HHI = 2224; Virtually certain.

D)   Pre-merger HHI = 1673; Post-merger HHI = 2503; Possible.

The correct answer was C)

The pre-merger HHI = 1673 = ((16.7x16.7x6)), the post-merger HHI = 2224 = ((16.7x16.7x4) + (33.3x33.3x1)). Given the 551 point change in the index, an antitrust challenge is virtually certain.