The primary factor determining the degree of vertical integration in a firm is:
A)Transaction costs
B)Administrative costs
C)The relative level of transaction costs to administrative costs
D)The nature of an industry

Question

Quizplus · Accepted Answer

The degree of vertical integration is primarily determined by comparing transaction costs with administrative costs. Firms will integrate vertically if the transaction costs of using the market are higher than the administrative costs of managing the same activities internally.

The Primary Factor Determining the Degree of Vertical Integration in a Firm