Exam 11: Decisions About Vertical Integration and Distribution

In a successive monopoly structure, if distributor has a constant marginal cost, the wholesale demand curve will lie below the retail marginal revenue curve.

If Mario's Pizza, a large frozen pizza distributor, builds a tomato sauce plant near Red Tomatoes, a large tomato farm, to reduce the costs of transporting fresh tomatoes, ______potentially faces a hold- up problem as the firm invested in a ______.

Vertical integration can reduce transaction costs through all of the following ways except which one?

If Happy Cows, a milk producer, purchases a dairy farm, this is an example of______ .

If double marginalization exists between an upstream firm and a downstream firm, the vertical integration of the two firms will generate more economic profit.

If Bella's Pizza, a local pizzeria, purchases canned tomatoes from a grocery store to make their pizza sauce, this is an example of ______.

Big Oranges produces orange juice. To make its juice, Big Oranges harvests oranges from its own farms in addition to purchasing oranges from other locally owned farms. Big Oranges is _______.

The manager of Steel Works learns of a new technological interdependency between the intermediate stage and the final stage of production. If Steel Works currently contracts with another firm for the final stage of production, which of the following is true?

Because vertical integration is a yes or no decision, managers cannot use marginal analysis.

The manager of View Your World, a high- end window manufacturer, notices that the cost to distribute their windows in the spot market has risen. As a result of the change, which of the following is true?

Which of the following is true regarding managerial diseconomies?

Slick Shades has a constant marginal cost of production equal to $80 and the distributors have a constant marginal cost of distribution equal to $30. If Slick Shades vertically integrates with the perfectly competitive distributors, the relevant demand curve for the combined firm is the ______demand curve and the combined firm's marginal cost is equal to ______.

The manager of View Your World, a high- end window manufacturer, notices that the cost to purchase glass for their windows in the spot market has fallen. As a result of the change, which of the following is true?

The manager of Slick Lens, a sunglasses manufacturer, notices that the cost to distribute their sunglasses in the spot market has risen. As a result of the change, which of the following is true?

The manager of Steel Works learns of a new technological interdependency between the final stage of production and the distribution of the final product. Steel Works currently contracts with another firm to distribute the product. If Steel Works vertically integrates with the distributor firm, which of the following is true?

All of the following are true regarding managerial diseconomies except which one?

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost, the difference between the wholesale demand curve and the consumer retail demand curve is the______.

Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades vertically integrates with the perfectly competitive distributors, the relevant demand curve for the combined firm is the ______demand curve and the combined firm's marginal cost is equal to______ .

Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds)and charging the profit- maximizing wholesale price, what is Slick Shades' profit (in hundreds)?

If a firm produces at more than one stage of the supply chain, the firm is vertically integrated.