Which of the Following Conclusions Can We Make About Vertical

question 14

Multiple Choice

Which of the following conclusions can we make about vertical integration with regard to scale and scope economies?

• A)If asset specificity is significant enough,vertical integration will be more profitable than arm's-length market purchases,even when production of the input is characterized by strong scale economies or when the firm's product market scale is small.
• B)A firm gains more from vertical integration when outside market specialists are better able to take advantage of economies of scale and scope
• C)A firm with a larger share of the product market will benefit more from vertical integration than a firm with a smaller share of the product market
• D)The more a firm produces,the greater its input and this ultimately decreases the likelihood that in-house production can take as much advantage of economies of scale and scope as an outside market specialist
• E)If a firm is considering whether to make or buy an input requiring significant up-front setup costs,and there is a large market outside the firm for the input,then the firm should buy the input from outside market specialists

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Definitions:

Ethyl Propanoate

A compound formed by the esterification of propanoic acid and ethanol, known for its fruity odor.

Alcohol

An organic compound characterized by the presence of a hydroxyl group (-OH) attached to a carbon atom, widely used in industry and chemistry.

Predict

To declare or indicate in advance; especially : foretell on the basis of observation, experience, or scientific reason.

Following

In the context of a sequence or process, it refers to something that comes after or as a result of another thing.