What describes a merger that joins firms in the same industry to diversify or cut costs?

The correct choice is a horizontal merger. This type of merger occurs when two firms in the same industry combine their operations. The primary motivations for such mergers include diversifying product lines, improving market shares, and realizing cost efficiencies through economies of scale. By merging, the companies can leverage shared resources, reduce redundant operational costs, and enhance competitive positioning in the marketplace.

In a horizontal merger, the firms involved typically offer similar products or services, which allows them to consolidate their strengths and better face competition. This strategy also helps in reducing costs as the merged entity can streamline operations and eliminate overlapping roles or facilities.

Other concepts like joint ventures, vertical mergers, and acquisitions do not encapsulate the same characteristics. A joint venture involves two companies partnering for a specific project without losing their separate identities. A vertical merger occurs between firms at different stages of production within the same industry—such as a manufacturer merging with a supplier. An acquisition describes the larger company taking over a smaller one, which may or may not be in the same industry and does not necessarily aim for the same strategic benefits as a horizontal merger.