b) Evaluate the view that mergers are always bad for consumers because they usually create powerful monopolies that harm consumer welfare. For candidates to effectively answer this question, they should recognise that mergers are likely to increase the market concentration in an industry, and potentially lead to the formation of oligopolies or monopolies. Mergers may benefit firms in the following ways Exploitation of economies of scale Efficiency Diversification . Investment in R&D Ability to compete in global markets Profitabilty All of the above may also benefit consumers in some industries, and candidates may highlight particular examples where this is the case. However, if powerful oligopolies or monopolies are formed, then con nsumers may not benefit because Higher prices Lower output Restricted choice Less long term incentive to innovate Productively and allocatingly inefficient Creation of barriers to entry . Price discrimination and appropriation of consumer surplus Additional evaluation may come from assessment that mergers may not be a problem if effectively regulated or judgement over the phrases "always" and "harm". Consumer welfare should be judged in terms of price, choice and quality