Which of the following factors affect vertical integration of firms?
A)The demand for the final product in the market.
B)The market power of each firm in an industry.
C)The number of firms in an industry.
D)The transaction cost at each stage of production.

Question

Quizplus · Accepted Answer

Vertical integration involves a firm expanding its operations by merging with or acquiring other companies in the different stages of the supply chain. The transaction cost at each stage of production is a key factor that influences the decision to vertically integrate. If transaction costs are high, it may be more cost-effective for a firm to bring the production in-house rather than relying on outside suppliers. Factors like the demand for the final product, market power, and the number of firms in an industry may also be relevant, but they are not as directly related to the decision to vertically integrate.

Which of the Following Factors Affect Vertical Integration of Firms