Answer (B) is correct . A reason to merge exists if the value of the combined firm exceeds the sum of the values of the separate firms. The combined firm may operate more efficiently. Following a merger, if the average cost of production falls as a result of production level increases, then there are economies of scale.
Answer (A) is incorrect because A conglomerate merger is the combination of firms in unrelated industries.
Answer (C) is incorrect because A vertical merger is when a firm combines with a supplier or customer.
Answer (D) is incorrect because A net operating loss of an acquired firm disappears in taxable reorganizations.
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