Texas A&M University (TAMU) MGMT209 Practice Exam

A merger between Chrysler and General Motors would be classified as a horizontal merger. This type of merger occurs when two companies operating in the same industry and at the same stage of production combine their operations. In this case, both Chrysler and General Motors are major automotive manufacturers, and their merger would consolidate their resources, market share, and product offerings within the same sector.

A horizontal merger can lead to various benefits such as increased efficiencies, reduced competition, and enhanced market power. By merging, Chrysler and General Motors could potentially streamline operations, reduce costs through economies of scale, and create a more robust presence in the automotive market.

Other options, while relevant in different contexts, do not accurately describe this scenario. Product extension would involve companies expanding their product lines within similar markets, geographic extension pertains to mergers aimed at increasing market presence in different regions, and vertical mergers involve companies at different stages of production coming together, such as a supplier merging with a manufacturer. In this case, since both companies are in the same industry and compete directly, the correct characterization is a horizontal merger.