When It Would Cost the Firm Less to Pursue an Activity

question 30

Multiple Choice

When it would cost the firm less to pursue an activity in-house than obtaining that activity from a supplier in the external market,then the firm should:

• A) Enter into a joint venture.
• B) Execute a short-term contract.
• C) Vertically integrate.
• D) Strategically outsource.

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Definitions:

Asymmetric Information

Asymmetric information exists when one party in a transaction has more or superior information compared to another, leading to an imbalance in power and potentially unfair outcomes.

Wage Changes

Adjustments in the rate of pay received by workers, which can be influenced by factors such as inflation, market demands, and changes in productivity.

Monitoring

The process of systematically checking or tracking the performance or quality of a process, system, or entity over time for oversight and evaluation purposes.

Systematic Mistake

Errors or biases that are consistent and predictable, often resulting from inherent flaws in the judgment or decision-making process.