If the mangers of Big Scoops, a local ice cream parlor, acquire a dairy farm to produce the milk for their ice cream, the managers of Big Scoops are likely to experience all of the following except which one?
A)an increase in managerial diseconomies
B)the hold- up problem
C)an increase in the complexity of coordination of Big Scoops
D)an increase in their required areas of expertise

Question

Quizplus · Accepted Answer

Acquiring a dairy farm to produce milk for their ice cream is a form of vertical integration, which typically aims to reduce the hold-up problem by securing a stable supply of inputs. The hold-up problem occurs when two parties may exploit the other in a transaction, especially after making transaction-specific investments. By owning the dairy farm, Big Scoops would have more control and less risk of being exploited by an external supplier, thus not likely experiencing an increase in the hold-up problem.

If the Mangers of Big Scoops, a Local Ice Cream