A market has 10 sellers. The fifth and seventh in size merge, becoming the largest seller in the market. How can this merger support competition in the market?

b. If the newly merged seller becomes more efficient and offers lower prices

Explanation:

Competition in the market is spurred by efficiency. The more efficient a company is at producing, the more competitive it is because it will be able to offer lower prices than its competitors.

If the newly created firm starts offering lower prices due to it being more efficient, the effect would be that the other companies would be forced to become efficient so as to lower their prices as well thereby increasing competition in the market.

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