however, trying to preserve competition probably will not work very well, and so government will often resort

to regulation of price and/or quantity of output. In recent decades, there has been a global trend toward less

government intervention in the price and output decisions of businesses.

11.1 Corporate Mergers

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Explain antitrust law and its significance

• Calculate concentration ratios

• Calculate the Herfindahl-Hirschman Index (HHI)

• Evaluate methods of antitrust regulation

A corporate merger occurs when two formerly separate firms combine to become a single firm. When one firm

purchases another, it is called an acquisition. An acquisition may not look just like a merger, since the newly

purchased firm may continue to operate under its former company name. Mergers can also be lateral, where

two firms of similar sizes combine to become one. However, both mergers and acquisitions lead to two
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