There Was a Fashionable Trend Towards "Virtual Companies" in Recent

question 65

Multiple Choice

There was a fashionable trend towards "virtual companies" in recent years, who make the largest profits in a value chain by co-ordinating all the other aspects. The risk with this plan is

• A)a virtual company has little control, so suppliers may collude to drive prices up.
• B)such a company may find it loses the ability to understand the industry it is in.
• C)a group of suppliers and/or customers may decide to co-ordinate themselves, and isolate the virtual company.
• D)b and c.

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Definitions:

Combinations of Capital

Various ways in which a firm can organize its financial resources and assets to support its production process and operations.

Total Cost

The sum of fixed and variable costs incurred in the production of goods or services.

Isocost Line

A graphical representation in economics that shows all possible combinations of inputs that cost the same total amount.

Slope

A measure of the steepness or incline of a line, calculated as the ratio of the vertical change to the horizontal change between two points on the line.