- 08/16/2024
- Business
- High School
answered
How did horizontal integration limit competition?A. Fewer independently owned companies existed to compete.
B. Companies agreed not to compete, so they all made more money.
C. More small companies tried to supply raw materials to large companies.
D. Suppliers could not produce enough to serve horizontally integrated companies.
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Horizontal integration limits competition by:
A. Fewer independently owned companies existed to compete: When companies horizontally integrate, they merge with or acquire similar companies in the same industry. This results in fewer independent competitors in the market, reducing the number of choices available to consumers and limiting competition.
B. Companies agreed not to compete, so they all made more money: In some cases of horizontal integration, companies might reach agreements to not compete with each other in certain areas to maintain their market shares and profitability. This lack of competition can lead to higher prices for consumers and less innovation in the industry.
C. More small companies tried to supply raw materials to large companies: Horizontal integration can lead to the formation of large companies that have more bargaining power over smaller suppliers. This can result in small companies being forced to supply raw materials at lower prices, which may limit their ability to compete or grow.
D. Suppliers could not produce enough to serve horizontally integrated companies: When companies merge horizontally and become larger entities, they may require more resources and supplies to meet the increased demand. If suppliers are unable to scale up their production to meet the needs of the horizontally integrated companies, it can limit competition by restricting the availability of inputs needed for production.
In conclusion, horizontal integration can limit competition through factors such as reduced independent competitors, agreements to avoid competition, power imbalances between large companies and small suppliers, and constraints on the supply chain's capacity to meet the demands of larger integrated companies.
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Final answer:
Horizontal integration limits competition by reducing the number of independent companies, allowing for potential profit increases and creating barriers for competitors.
Explanation:
Horizontal integration limited competition by reducing the number of independently owned companies that existed to compete. When companies engage in horizontal mergers, they may agree not to compete, which can lead to increased profits. Additionally, if one company controls key resources or downstream stages in the value chain, it can make it challenging for competitors to match their products in terms of cost and quality.
Learn more about Impact of Horizontal Integration on Competition here:
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