Question

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) all of the above

B) 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.

C) 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.

D) 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.

Answer 1