Which of the Following Conclusions Can We Make About Vertical

question 14

Multiple Choice

Which of the following conclusions can we make about vertical integration with regard to scale and scope economies?

• 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 a larger share of the product market will benefit more from vertical integration than a firm with a smaller share of the product market
• 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:

Manipulative

A method or approach that seeks to influence others in a skillful or sometimes deceptive manner.

Flexible

Capable of easily adapting or changing to accommodate new circumstances.

Time

A continuous, quantifiable period during which actions, processes, or conditions exist or take place.

Space

An area or volume available or used for a specific purpose, or the infinite extension of the three-dimensional region in which all matter exists.