The Purpose of Having Multiple Suppliers for a Product Is

question 51

Multiple Choice

The purpose of having multiple suppliers for a product is to

• A) guarantee the supplier sufficient business when the supplier has to make a significant buyer-specific investment.
• B) ensure a degree of competition.
• C) ensure the possibility of a backup should a source fail to deliver.
• D) both B and C

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Definitions:

Allocative Efficiency

Achieved when resources are distributed in a way that maximizes the net benefit to society, ensuring that each good is produced up to the point where the last unit provides a marginal benefit equal to the marginal cost of producing it.

Regulation Dilemma

The challenge of finding the balance between necessary government intervention in markets to correct failures and excessive regulation that may stifle competition and innovation.

Economic Profits

The excess of total revenues over the total costs, including both explicit and implicit costs, indicating the profitability beyond the normal return of investments.

Natural Monopoly

A market condition where a single supplier can provide a product or service at a lower cost than any potential competitor, often due to economies of scale.