Conglomerate mergers differ from horizontal mergers because:

• A. Conglomerate mergers are illegal, whereas horizontal mergers are legal.
• B. Conglomerate mergers increase market concentration more than horizontal mergers.
• C. Conglomerate mergers always result in a monopoly, while horizontal mergers never do.
• D. Conglomerate mergers involve firms operating in unrelated markets, while horizontal mergers involve firms in the same industry.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definition of a horizontal merger. A horizontal merger occurs when two firms operating in the same industry or market combine their operations. This typically leads to increased market share within that industry.
2. Step 2: Understand the definition of a conglomerate merger. A conglomerate merger happens when two firms operating in unrelated or different markets merge. This means the firms do not compete directly in the same product or service market.
3. Step 3: Compare the effects on market concentration. Horizontal mergers tend to increase market concentration within a specific industry because they combine competitors, while conglomerate mergers do not directly affect market concentration in any single industry since the firms operate in different markets.
4. Step 4: Clarify legal and monopoly aspects. Neither conglomerate nor horizontal mergers are inherently illegal or always result in monopolies. Legality depends on antitrust laws and market impact, and monopolies result only if the merger significantly reduces competition.
5. Step 5: Summarize the key difference. The main distinction is that conglomerate mergers involve firms in unrelated markets, whereas horizontal mergers involve firms competing in the same industry.