Which of the arguments Staples and Office Depot made in defense of their propose

Question

Which of the arguments Staples and Office Depot made in defense of their proposed merger would be least defensible on economic grounds?

A) The two firms were in competition with all other office supply stores, not just office supply superstores.

B) Entry into the office supply market is relatively easy.

C) The history of low pricing by the two stores meant that they would not raise prices in the future after they merged.

D) There would be substantial economies of scale.

2. Assume that when price is $20, quantity demanded is 9 units, and when price is $19, quantity demanded is 10 units. Based on this information, we can conclude that over the price range from $19 to $20, demand is price:

A) unit elastic.

B) elastic.

C) inelastic.

D) cannot be determined.

Explanation / Answer

1) Which of the arguments Staples and Office Depot made in defense of their proposed merger would be least defensible on economic grounds?

Solution: The history of low pricing by the two stores meant that they would not raise prices in the future after they merged

Explanation: After merging they will not increase the price was the supported argument by Staples and Office Depot in their defense of their proposed merger

2) Assume that when price is $20, quantity demanded is 9 units, and when price is $19, quantity demanded is 10 units. Based on this information, we can conclude that over the price range from $19 to $20, demand is price:

Solution: elastic

Explanation: An elastic demand means when the change in quantity demanded due to a change in price is large.

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