A Company That Is Already Diversified May Choose to Broaden

question 94

Multiple Choice

A company that is already diversified may choose to broaden its business scope by building positions in new related or unrelated businesses because of all of the following EXCEPT

• A) it has resources or capabilities that are eminently transferable to other related or complementary businesses.
• B) the company's growth is sluggish and it wants the sales and profit boost that a new business can provide.
• C) management wants to lessen the company's vulnerability to seasonal or recessionary influences or to threats from emerging new technologies, legislative regulations, and new product innovations that alter buyer preferences and resource requirements.
• D) it wants to make new acquisitions to strengthen or complement some of its present businesses, market positioning, and competitive capabilities.
• E) its top management wants to increase its compensation.

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Definitions:

Market Equilibrium

The condition where the quantity of a good or service demanded equals the quantity supplied, resulting in no incentive for price to change.

Output Level

The quantity of goods or services produced by a business within a given period.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Long-Run

A period of time in economics during which all factors of production and costs are variable, allowing for complete adjustment to changes.