If All of the Divisions in a Vertically Integrated Firm

question 32

Multiple Choice

If all of the divisions in a vertically integrated firm are owned by the same company, why is it possible that asymmetric information problems can lead to inefficient outcomes in vertically integrated firms?

• A) Divisions that produce parts for other divisions have effective monopoly power, so the outcome for these division must be inefficient.
• B) This outcome is no longer possible in the U.S. after passage of the Sarbanes-Oxley law.
• C) Vertically integrated firms are often subject to antitrust investigations, so managers routinely limit the amount of information that flows between divisions.
• D) Managers in some divisions may not have information about production capacities or costs in related divisions.

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Definitions:

Health-Related Problem

Any issue affecting an individual's physical or mental health, stemming from genetic, environmental, or lifestyle factors.

Resolving Phase

A stage in therapeutic or change processes where conflicts or problems are addressed and efforts are made to develop solutions.

Transition

The process or period of changing from one state or condition to another.

Physical Activity Patterns

The habitual levels and types of physical exercise or activity an individual engages in, often assessed for health studies.