A firm is more likely to produce its own input if all of the following are true except which one?
A)The firm experiences diseconomies of scale when producing the input.
B)The transportation cost of the input is expensive.
C)The firm is concerned about the hold- up problem.
D)The firm has trade secrets.

Question

Quizplus · Accepted Answer

If a firm experiences diseconomies of scale when producing its own input, it is not more likely to produce its own input. The other three factors listed (expensive transportation cost, concern about the hold-up problem, and possession of trade secrets) may all make a firm more likely to produce its own input.

A Firm Is More Likely to Produce Its Own Input