Chapter 9.3, Problem 4R

To determine

To state: The ways in which merger helps the business to be more efficient and increase its profits.

Answer to Problem 4R

Mergers are significant because they help in acquiring firm in increasing their market share and also offers a potential growth for their business.

Explanation of Solution

Merger occurs when two firms are combined into one. The resultant firm increases its market share and creates more profitable opportunities. Mergers help in decreasing competition in the market which could further cause the businesses to increase their prices thereby bagging more profits. It benefits the small companies who are on the verge of winding up, they get merged into big companies. The work-power is increased which in turn boosts productivity and efficiency of the business.

Economics Concept Introduction

Introduction: Merger refers to the combination of two or more companies formed into one single corporation. It is an agreement between two or more corporations to form a new company. Mergers are usually adopted by the companies to expand company’s business base or increase market share.