Two movie studios combining to form one larger studio is an example of which of the following?
A) forward vertical integration
B) horizontal integration
C) backward vertical integration
D) diversification
Answer: B
Explanation: Each movie studio is combining with a competitor, a clear example of horizontal integration, making that the correct response. Since neither company is taking control of supply or distribution, both forms of vertical integration can be eliminated as correct responses. Horizontal integration differs from diversification in that in diversification the company doesn't combine with competitors but rather makes purchases of supporting industries. Clearly, the studios are combining with competitors here, making "horizontal integration" correct and "diversification" incorrect.
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