MGEC40H3 Study Guide - Midterm Guide: Vertical Integration, Multiple Choice

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEC40H3
• Professor: Chandra Veer Singh

Document Summary

Short answer questions: consider firms in the following industries: Downstream firms in industry a have extremely high fixed costs. Downstream firms in industry b have zero fixed costs. Assume we have no other data on these industries. Why: you are told that in a certain industry, firms are producing at twice the level of the mes. Which of these activities would ford be more likely to vertically integrate into and why? (b) now ignore the information in part (a) above. Assume that the number of tires and brakes that ford needs to purchase are qt and qb respectively. Denote the mes for tires and brakes as. Further, suppose you are told that qt/mest < qb/mesb. Short answer questions: they are more likely to practice tapered integration in industry b because there is no loss of. Economies of scale from doing so (recall that the main downside of tapered integration is the loss of economies of scale).