Question

Which one of the following descriptions best describes "horizontal integration"?

A) the economic development of the American west

B) when the government controls the factors of production

C) a company owns all the businesses that supply it with raw goods

D) a company acquires competing businesses and merges them into a single entity

Answer 1

The correct answer is D.

Horizontal integration is the process through which business which operate in the same stage of the value chain are merged and conform a single entity. These businesses can belong to the same industry (competitors) or to different industries (relationship of indifference among them).

Horizontal integration of firms within the same industry can be considered illegal under the provisions of the Sherman Antitrust Act, as it constitutes a practice that prevents competition.