An Attempt to Explain That Vertical Integration Is More Efficient

question 14

Multiple Choice

An attempt to explain that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market becomes too great has been proposed by

• A) population theory.
• B) institution theory.
• C) freakonomics.
• D) transaction cost economics.
• E) transaction growth theory.

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Definitions:

Novation

The creation of a new contract through the substitution of a third party for one of the original parties to a contract by the consent of all.

Third Party

An entity not directly involved in a transaction or legal agreement but who may be affected by it.

Force Majeure

A contractual clause that frees both parties from liability or obligation when an extraordinary event or circumstance beyond their control occurs.

Contract Termination

The legally sanctioned end of a contract's validity, which can occur due to fulfillment, mutual agreement, or breach by one of the parties.