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:

Axial

Relating to the central part of the body, which includes the head, neck, and trunk.

Intervertebral Disk

A fibrocartilaginous disc situated between adjacent vertebrae in the vertebral column, acting as a shock absorber and allowing movement.

Thoracic Region

The part of the body including the chest, between the neck and the abdomen, containing the thoracic vertebrae and ribs.

Vertebra

One of the individual bones that make up the vertebral column (spine), providing structural support and protection for the spinal cord.