Version A

I. Multiple Choice

(1)b. (2)a. (3)c. (4)e. (5)b. (6)b. (7)e. (8)d. (9)a. (10)a.

II. Problems

(1) [Statutes: 15 pts]

1. Sherman Act, Section 2.
2. Clayton Act, Section 7.
3. Celler-Kefauver Act.
4. Hart-Scott-Rodino Act.
5. Sherman Act Section 1.

(2) [HHI and merger guidelines: 24 pts]

1. HHI = 1350.
2. Moderately concentrated.
3. HHI = 1400.
4. Moderately concentrated.
5. No.
6. Guidelines say that if postmerger HHI is less than 1800 and merger increases HHI by less than 100 points, the merger will not be challenged. (See Horizontal Merger Guidelines, Section 1.51.)

(3) [Welfare tradeoffs of mergers: 36 pts]

1. $3.
2. 14 million.
3. Marginal revenue curve has intercept at $10 and slope = -1 / 1 million.
4. $6.
5. 8 million.
6. 2/3 = 0.667 .
7. $33 million.
8. $24 million.
9. $9 million.
10. $8 million.
11. decrease.
12. $1 million.

II. Critical Thinking

In view of the Merger Guidelines, the U.S. government is likely to permit more mergers during this current recession. Many firms are in danger of failing because of the recession. Section 5 of the Guidelines says that mergers will generally permitted if one of the firms is about to fail, because without merger that firm would exit the industry anyway. (See Horizontal Merger Guidelines, Section 5.)

Version B

I. Multiple Choice

(1)c. (2)b. (3)a. (4)a. (5)a. (6)c. (7)c. (8)b. (9)d. (10)e.

II. Problems

(1) [Statutes: 15 pts]

1. Hart-Scott-Rodino Act.
2. Sherman Act Section 1.
3. Sherman Act, Section 2.
4. Clayton Act, Section 7.
5. Celler-Kefauver Act.

(2) [HHI and merger guidelines: 24 pts]

1. HHI = 2350.
2. Highly concentrated.
3. HHI = 2450.
4. Highly concentrated.
5. Yes.
6. Guidelines say that if postmerger HHI is greater than 1800 and merger increases HHI by more than 50 points, the merger will "raise significant competitive concerns". If the merger increases HHI by 100 or more points, it will be presumed to "create or enhance market power or facilitate its exercise. (See Horizontal Merger Guidelines, Section 1.51.)

(3) [Welfare tradeoffs of mergers: 36 pts]

1. $6.
2. 10 million.
3. Marginal revenue curve has intercept at $16 and slope = -2 / 1 million.
4. $10.
5. 6 million.
6. 0.6 .
7. $32 million.
8. $24 million.
9. $8 million.
10. $12 million.
11. increase.
12. $4 million.

II. Critical Thinking

Same as Version A.

[end of answer key]