When the Transaction Costs of Operating Through the Market Are

question 20

Multiple Choice

When the transaction costs of operating through the market are too high:

• A) firms are more likely to grow vertically up or down the vertical chain.
• B) firms are less likely to internalize its transactions.
• C) firms will move from producing general assets to specific assets.
• D) contracts specified by the firm are more likely to be complete.

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Definitions:

Ending Inventory

The total value of all inventory a company has in stock at the end of an accounting period, which is used to calculate the cost of goods sold.

Operating Expenses

The costs associated with running the day-to-day operations of a business, excluding the cost of goods sold.

Gross Profit

The difference between revenue and the cost of goods sold, indicating how efficiently a company produces goods or services.

Cost of Goods Sold

Represents the direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the product.