What type of merger combines firms operating at different levels in the production and marketing process?

A vertical merger is the correct answer as it involves the combination of firms that operate at different stages of production or distribution within the same industry. This type of merger allows companies to enhance efficiencies by streamlining the supply chain, reducing costs, and gaining more control over their operations. For example, when a manufacturer merges with a supplier, it ensures a steady supply of materials, minimizes disruptions, and can lead to better pricing strategies.

In contrast, a horizontal merger occurs between firms that operate at the same level in the industry, such as competitors merging to increase market share. A conglomerate merger involves companies that operate in entirely different industries, which may help in diversification but does not focus on the production process. A joint venture is a partnership where two or more companies collaborate on a specific project, but it does not result in the merging of companies into a single entity. Thus, vertical mergers are specifically aimed at optimizing the supply chain and improving production efficiency across different levels of an industry.