Which of the Following Statements Regarding Vertical Integration Is False

question 41

Multiple Choice

Which of the following statements regarding vertical integration is false?

• A) Vertically integrated companies may be large, but unlike other large corporations, since they remain focused in one industry they are easy to run.
• B) A company might not be happy with how its products are being distributed, so it might decide to take control of its distribution channels.
• C) A company might conclude that it can enhance its product if it has direct control of the inputs required to make the product.
• D) The principal benefit of vertical integration is coordination. By putting two companies under central control, management can ensure that both companies work toward a common goal.

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Definitions:

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors, leading to more efficient trade possibilities.

Specialize

Refers to the process of focusing on a specific area of knowledge or skill within a broader field.

Comparative Advantage

The ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.

Absolute Advantage

The ability of a country or entity to produce a good or service more efficiently than its competitors.