What are the advantages of vertical integration?
By putting activities under the same management, vertical integration can reduce risks of opportunistic behavior by people who control specific assets. These risks are greater in thin markets, where few alternative assets or supplies are available.
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Assume that the United States uses 20 worker-hours to produce 1 computer and 5 worker-hours to produce 1 unit of food; assume also that Japan uses 10 worker-hours to produce 1 computer and 30 worker-hours to produce 1 unit of food. Which of the following statements is true?
a. Japan has the comparative advantage in food production. b. The United States has the comparative advantage in food production. c. The United States has the absolute advantage in food production. d. The United States has a lower opportunity cost for making computers. e. Japan has a lower opportunity cost for making food.
If the cost of food & beverages increases by 10 percent, then, other things the same, the CPI is likely to increase by about
a. 1.5 percent. b. 7.5 percent. c. 10 percent. d. 20 percent.