Which term describes a monopoly where a company buys out all of its competition?

Which term describes a monopoly where a company buys out all of its competition?

• A. Vertical Integration
• B. Horizontal Integration
• C. Diversification
• D. Conglomerate Merger

Answer: (B)

Buying up rival firms in the same industry to reduce competition and increase market share is horizontal integration. This strategy concentrates market power by consolidating players at the same stage of production, making it easier for the firm to influence prices and control the market. Vertical integration would involve controlling different stages of the production process (like suppliers or distributors), not eliminating competition among peers. Diversification and a conglomerate merger describe broadening into new products or unrelated industries, which doesn’t target monopoly power within a single market. So the term that fits the idea of absorbing all competition to create a monopoly is horizontal integration.

Buying up rival firms in the same industry to reduce competition and increase market share is horizontal integration. This strategy concentrates market power by consolidating players at the same stage of production, making it easier for the firm to influence prices and control the market. Vertical integration would involve controlling different stages of the production process (like suppliers or distributors), not eliminating competition among peers. Diversification and a conglomerate merger describe broadening into new products or unrelated industries, which doesn’t target monopoly power within a single market. So the term that fits the idea of absorbing all competition to create a monopoly is horizontal integration.