Large Manufacturing Firms That Buy Many Different Parts or Components

question 146

Multiple Choice

Large manufacturing firms that buy many different parts or components (e.g., auto manufacturers) can choose which parts to buy from other firms and which parts to make in their own factories. These manufacturers may be able to use monopsony power to reduce the price paid to outside suppliers for parts that are:

• A) standard components for many manufacturers so that there are many buyers and sellers.
• B) only used in their cars so that there is one buyer and a few sellers.
• C) bought and sold in perfectly competitive markets.
• D) none of the above

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Definitions:

Filing Statement

An official document submitted to a regulatory body or institution, detailing certain financial information or changes in ownership.

Tax-Free

Income, dividends, or distributions that are not subject to federal income tax.

Formed Corporation

A business entity that is legally created and registered under state law, offering liability protection to its owners.

Transaction

An agreement or exchange between two parties involving goods, services, or financial assets.