If an important component of a firm's production process is difficult to specify in a contract and even more difficult to enforce in its production standards,then it probably makes sense to:
A)buy the component in the open market.
B)use a simple short-term contract.
C)vertically integrate upstream to build the component.
D)incur information cost.

Question

Quizplus · Accepted Answer

Vertically integrating upstream and building the component in-house would give the firm greater control over the production process and eliminate the difficulty in specifying and enforcing the component in a contract or production standards. This would also ensure a more consistent supply of the component and potentially reduce costs in the long run.

If an Important Component of a Firm's Production Process Is