Long-Term Contracts

Multiple Choice

Long-term contracts:

A) are preferable to short-term contracts when there is a minimal need for cooperation.
B) are preferable to vertical integration when it is not feasible to exchange hostages.
C) generally result in lower prices than does competitive bidding.
D) achieve exactly the same outcomes as vertical integration, but they incur higher bureaucratic costs.
E) are a low-cost alternative to vertical integration when it is possible to build cooperative relationships with suppliers.