A firm chooses vertical integration to reduce all of the following costs, EXCEPT:
A)the cost of investing in diversified assets.
B)the cost of finding a trading partner.
C)the cost of devising and enforcing an agreement.
D)the cost of evaluating the other party's performance.

Question

Quizplus · Accepted Answer

Vertical integration involves a firm taking control of different stages of the supply chain to eliminate the costs and risks associated with dealing with external suppliers or customers. However, it is not done to reduce the cost of investing in diversified assets, but rather to secure essential inputs, improve production efficiency, and enhance market power.

A Firm Chooses Vertical Integration to Reduce All of the Following