When asset specificity is very low and there is no market uncertainty, then it is best for a firm to:
A) buy in the open market.
B) use a long-term contract.
C) vertically integrate.
D) engage in a joint venture.

Question

Quizplus · Accepted Answer

When asset specificity is very low and there is no market uncertainty, the risks associated with using long-term contracts, vertical integration or joint ventures outweigh the benefits. Therefore, the best option is to purchase or acquire the necessary assets or inputs through open-market transactions. This approach provides the firm with flexibility and reduces transaction costs.

When Asset Specificity Is Very Low and There Is No