Sugar farmers almost always jointly own local sugar mills:
A)because rich people own all the factors of production in developing countries.
B)big vertically integrated firms make more profit.
C)because of the hold- up problem.
D)since most of these industries are monopolized.

Question

Quizplus · Accepted Answer

The hold-up problem is a situation where one party to a transaction has an incentive to take advantage of the other by exploiting their dependence on the transaction continuing. In the case of sugar farming, if farmers do not jointly own local sugar mills, they run the risk of being held up by the mill owners who may demand higher prices for their services. By jointly owning the mills, farmers have more bargaining power and can ensure fair prices for their crops.

Sugar Farmers Almost Always Jointly Own Local Sugar Mills