A ﬁrm is faced with a monopoly supplier for its raw materials. If the ﬁrm wants to achieve economies of scale through vertical integration, what should the ﬁrm do?
A) Sell goods to new foreign markets.
B) Continue to buy raw materials from the monopoly supplier.
C) Purchase the monopoly supplier.
D) Merge with another ﬁrm that produces an unrelated good.

Question

Quizplus · Accepted Answer

Vertical integration involves a company expanding its operations into an adjacent stage within its industry. By purchasing the monopoly supplier (C), the firm integrates backwards into the supply chain, securing its raw material supply and potentially achieving economies of scale by reducing costs and increasing efficiency.

A ﬁRm Is Faced with a Monopoly Supplier for Its