IGCSE Economics Paper-2: Specimen Questions with Answers 10 - 10 of 100

Passage

In an economy there are many large firms. But small firms remain small.

Question 10 (5 of 5 Based on Passage)

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Describe in Detail

Essay▾

Explain with the help of examples the difference between vertical, horizontal, and conglomerate integration.

Explanation

When two companies decide to combine under single ownership the companies are said to be merged. There are three types of mergers:

  • Horizontal merger: Such type of merger refers to the merger of companies who have involved in the production of similar goods and services in the same market. For example- Merger of HP and Compaq. The horizontal merger reduces the level of competition in the market.
  • Vertical merger: It is a merger between companies of same line of production but which are at different stages of the production process. the vertical merger takes place between companies where one buys A vertical something to the other one. For example- eBay buying PayPal or Pepsi merger with restaurants.

  • Conglomerate merger: Conglomerate merger takes place between companies in different industries. The government gives more preference to such mergers as it reduces competition in the market and is more likely to increase competition. For example – DuPont acquired shares in GM or Phillips Morris and Miller brewing.

Types of Merger

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