Exam 11: Decisions About Vertical Integration and Distribution

If the mangers of Big Scoops, a local ice cream parlor, acquire a dairy farm to produce the milk for their ice cream, the managers of Big Scoops are likely to experience all of the following except which one?

Costs incurred in imposing compliance with a contract between an upstream firm and a downstream firm are considered to be monitoring costs.

If a German firm owns a U.S.- based firm, the combined firm is subject to the corporate tax laws in Germany.

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 profit- maximizing quantity will be ______ the profit- maximizing quantity if they did not vertically integrate and the combined firm will earn ______Profit if they did not vertically integrate.

If Good Smells, a perfume manufacturer, purchases several local retail shops to sell their perfumes, this is an example of______ .

If an upstream firm and a downstream firm want to establish a contract, all of the following costs can be incurred except which one?

A _______ monopoly is a market structure in which a monopoly producer sells to a monopoly distributor.

Firms that set their transfer prices equal to the price charged to an independent customer violate laws in many nations.

Vertical integration can only occur when a firm acquires a firm that is closer to the consumer.

The top of the supply chain contains______ and is referred to as the ______end of the chain.

All of the following are true regarding transfer prices except which one?

If Good Smells, a perfume manufacturer, sells its home fragrance line, this is an example of______ .

Vertical integration of a monopoly and a perfectly competitive firm does not yield greater economic profit.