How does unpredictability in the environment influence the relative costs of the two forms of economic organization?
A)It saturates the management of contracts activity and external relationships
B)It disrupts processes and procedures
C)It tends to increase administrative costs of vertical integration because of the need for flexibility and speed
D)It has no influence at all

Question

Quizplus · Accepted Answer

Unpredictability in the environment tends to increase the administrative costs of vertical integration because it requires flexibility and speed to adapt to changing conditions. This can make vertical integration less efficient and more costly compared to market exchange which may be more able to adapt quickly to changes in the environment.

How Does Unpredictability in the Environment Influence the Relative Costs