A Firm Should Make a Component Internally Rather Than Contracting

question 39

Multiple Choice

A firm should make a component internally rather than contracting it out to a supplier when:

• A) substantial investments in specialized assets can be avoided.
• B) the firm uses proprietary product technology that helps in gaining competitive advantage.
• C) it wants to reduce the number of subunits in the organization.
• D) the optimal location for manufacturing a product is beset by political risks.
• E) different tax regimes and exchange rate movements increase the complexity of transfer pricing decisions.

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Definitions:

Predicate

The part of a sentence or proposition that states something about the subject, often describing an action or characteristic.

Proposition

A claim that articulates a viewpoint or judgment.

Sodium

A chemical element with the symbol Na and atomic number 11, a highly reactive metal.

Sodium

Sodium is a chemical element with the symbol Na and atomic number 11, known for its essential role in human physiology and its presence in salt.