Answer
Laws give the government the power to determine whether a merger between two firms will occur or not. This is necessary from society's viewpoint because it prevents price increases by the monopolistic power given to the merged firms.
A good reason for firms to merge is increased efficiency between two firms and reduced production costs, which lead to price decreases.
A bad reason is the desire to pursue monopolistic power and consequently increase prices above optimal levels as a way to increase profits.
Work Step by Step
Laws give the government the power to determine whether a merger between two firms will occur or not. This is necessary from society's viewpoint because it prevents price increases by the monopolistic power given to the merged firms.
A good reason for firms to merge is increased efficiency between two firms and reduced production costs, which lead to price decreases.
A bad reason is the desire to pursue monopolistic power and consequently increase prices above optimal levels as a way to increase profits.
