Banana Computers has decided to procure processing chips required for its laptops from external suppliers instead of manufacturing them in their own facilities. How will this decision affect the firm?
A) The firm will be protected against the principal-agent problem.
B) The firm's administrative costs will be low because of necessary bureaucracy.
C) The firm will have more flexibility in purchasing and comparing prices of goods and services.
D) The firm will have high-powered incentives, such as hourly wages and salaries.

Question

Quizplus · Accepted Answer

Banana Computers will have more flexibility in purchasing and comparing prices of goods and services. The advantages of obtaining goods and services externally include increased flexibility. Transacting in markets enables those who wish to purchase goods to compare prices and services among many different providers.

Banana Computers Has Decided to Procure Processing Chips Required for Its