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:

Utility

Numerical score representing the satisfaction that a consumer gets from a given market basket.

Distribution

The process of making a product or service available for use or consumption by a consumer or business user.

Basic Model

A simplified representation of a system or process, used to analyze fundamental aspects without complex details.

Consumer Behavior

The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.