Spot markets are an efficient way for the firm to purchase inputs if:
A) opportunism is not a problem.
B) suppliers engage in hold-up.
C) profit sharing is used to compensate managers.
D) the supplier needs specialized investment to produce the input.

Question

Quizplus · Accepted Answer

Spot markets are beneficial for firms when opportunism is not a problem. In such cases, the firm can easily purchase inputs as and when required without the need for long-term commitments or contracts. This provides more flexibility and reduces costs for the firm. However, if opportunism is present, the supplier may engage in hold-up or other opportunistic behaviors, which can increase costs for the firm. Therefore, if opportunism is not a problem, spot markets are an efficient way for the firm to purchase inputs.

Spot Markets Are an Efficient Way for the Firm to Purchase