Text 1 When companies in the same industry propose merging with one another, they often claim that the merger will

Question

Text 1 When companies in the same industry propose merging with one another, they often claim that the merger will benefit consumers by increasing efficiency and therefore lowering prices. Economist Ying Fan investigated this notion in the context of the United States newspaper market. She modeled a hypothetical merger of Minneapolis-area newspapers and found that subscription prices would rise following a merger. Text 2 Economists Dario Focarelli and Fabio Panetta have argued that research on the effect of mergers on prices has focused excessively on short-term effects, which tend to be adverse for consumers. Using the case of consumer banking in Italy, they show that over the long term (several years, in their study), the efficiency gains realized by merged companies do result in economic benefits for consumers. Based on the texts, how would Focarelli and Panetta (Text 2) most likely respond to Fan&rsquo;s findings (Text 1)?

Accepted Answer

Choice C is the best answer because, based on the information presented in the texts, it represents how Focarelli and Panetta would most likely respond to Fan&rsquo;s findings. Text 1 indies that Fan found that a newspaper merger would result in a rise in subscription prices. This rise wouldn&rsquo;t benefit customers, who would have to pay more for news after a merger. Text 2 presents Focarelli and Panetta&rsquo;s argument that merger research tends to focus too much on what happens immediately after the merger. Text 2 goes on to describe their finding that mergers can be economically beneficial for consumers over the long term. This suggests that Focarelli and Panetta would encourage Fan to investigate the long-term effect of the hypothetical newspaper merger on subscription prices. Choice A is incorrect because Text 2 doesn&rsquo;t indie that Focarelli and Panetta connect the effects of mergers to specific loions. Instead, Focarelli and Panetta focus on the length of time over which the effects of mergers should be evaluated. Choice B is incorrect because Text 2 indies that Focarelli and Panetta found that merged companies experience "efficiency gains" over the long term, meaning that their expenses go down relative to their output, not that their expenses increase. Choice D is incorrect because there&rsquo;s no indiion in Text 2 that Focarelli and Panetta believe that the newspaper industry is different from any other industry when it comes to the effects of mergers. Although their own research was about consumer banking, Text 2 suggests that they view their conclusions as applicable to mergers in general.

Question 918ce1