Asked by
Daryl Tinambacan
on Oct 25, 2024Verified
There were initially two satellite radio providers in the U.S. market, Sirius and XM Radio. The firms merged to form one firm, and the federal government did not challenge the merger. Although the merger created a single seller in this market, the existence of a monopoly may not have much impact on U.S. consumers. Which of the following statements are plausible reasons for the limited impact of the merger?
A) There are very large fixed costs in providing satellite radio, and the industry may be a natural monopoly. One seller may be able to operate at lower cost than two sellers.
B) Although there will only be one seller of satellite radio, there are other forms of radio broadcasts available to U.S. consumers and demand for satellite radio may be relatively elastic.
C) The merged firm will operate at higher capacity and may be able to reduce costs through economies of scale and perhaps learning-by-doing, which will benefit U.S. consumers.
D) all of the above
Natural Monopoly
A market structure where a single firm can produce the entire market's supply at a lower cost than could multiple firms due to economies of scale.
Economies of Scale
Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between per-unit fixed cost and the quantity produced.
Elastic
A characteristic of a demand or supply curve that indicates a high sensitivity to changes in price.
- Understand the impacts of mergers and acquisitions in monopolistic markets and their potential benefits or harms to consumers.
Verified Answer
MF
Learning Objectives
- Understand the impacts of mergers and acquisitions in monopolistic markets and their potential benefits or harms to consumers.