A firm is more likely to produce its own input if all of the following are true except which one?
A)The firm is concerned about quality control.
B)The transportation cost of the input is inexpensive.
C)The firm experiences economies of scale when producing the input.
D)The firm has trade secrets.

Question

Quizplus · Accepted Answer

If the transportation cost of the input is inexpensive, then it is more cost-effective to purchase the input from an outside source rather than producing it in-house. Thus, the firm would not be more likely to produce its own input in this scenario. All the other options (quality control concerns, economies of scale, and trade secrets) may provide incentives for a firm to produce its own input.

A Firm Is More Likely to Produce Its Own Input