If a firm makes its own inputs rather than buying them, it _______need to be concerned about the hold- up problem and_______ need to be concerned with contract compliance.
A)does; does not
B)does; does
C)does not; does not
D)does not; does

Question

Quizplus · Accepted Answer

If a firm makes its own inputs, it does not need to be concerned about the hold-up problem since there is no supplier that can purposely delay or reduce the quality of the input. Similarly, it does not need to be concerned with contract compliance since there is no external supplier that needs to fulfill the terms of the contract.

If a Firm Makes Its Own Inputs Rather Than Buying