Which of the Following Conclusions Can We Make About Vertical

question 18

Multiple Choice

Which of the following conclusions can we make about vertical integration with regards to product market share and scope?

• 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 multiple product lines will benefit more from being vertically integrated in the production of components for those products in which it can achieve significant market scale
• 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:

Setting Objectives

The process of establishing clear, measurable, and achievable goals to guide organizational or individual activities.

Controlling

The process of monitoring performance, comparing it with desired outcomes, and taking corrective action as necessary to ensure achievement of objectives.

Implemented Plans

Strategies or actions that have been put into effect as part of achieving goals or objectives.

Objectives

Specific, measurable goals that are established to guide efforts towards achieving an organization's strategic aims.