Question

In 1999, the Federal Trade Commission allowed Exxon and Mobil to merge. At the time, Exxon and Mobil were the top two firms in their industry, and their merger created the largest corporation in the world. To allow the merger, Exxon and Mobil agreed to sell 2,431 gas stations. Of these, 1,740 were in the mid-Atlantic states, 360 were in California, 319 were in Texas, and 12 were in Guam.

Why would the U.S. government require Exxon and Mobil to divest themselves of so many gas stations in localized parts of the country to be willing to allow the merger to occur?

a. Because these geographic regions had too many gas stations.
b. To protect consumers from inappropriate price decreases.
c. To ensure competition in these regions and protect consumers from unwarranted price increases.
d. To ensure that Exxon-Mobil would earn fair profits in these geographic areas.

Answer 1

Answer:

1999 Merger of Exxon and Mobil

The reason that made the U.S. government to require Exxon and Mobil to divest themselves of so many gas stations in localized parts of the country to be willing to allow the merger to occur is:

c. To ensure competition in these regions and protect consumers from unwarranted price increases.

Explanation:

The agreement to sell so many gas stations in localized parts of the country was to forestall antitrust lawsuits.  It was also made to protect consumers from unwarranted price increases, allowing more competition in the affected areas, where ExxonMobil owed too many gas stations.

Answer 2

The reason why the US would require these two companies to divest themselves is because to ensure competition in these regions and protect consumers from unwarranted price increases.

The answer to this question is option c. Sometimes when two companies merge into one, they could become too powerful. When this is the case, they may end up driving out all their competitors from the market.

At this point, a monopoly may arise from the companies. When a monopoly arises, they would be able to set the price to any amount that they want. This divest option by the government was to ensure the protection of consumers from a situation of price hikes.

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