If the average cost per unit decreases when a horizontal merger occurs then the combined firm is benefiting from synergy arising from:

A) A reduction in net working capital.
B) A beachhead.
C) Economies of scale.
D) Market power.
E) Revenue enhancement.

Economies of Scale

Refers to the cost advantage experienced by firms when production becomes efficient, as the scale of production increases, leading to a decrease in average costs per unit.

Horizontal Merger

A merger between companies in the same industry, often aiming to increase market share, reduce competition, or achieve economies of scale.

Synergy

The concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts after a merger or acquisition.