Acquiring a monopoly supplier has to be more cost-effective than buying the raw materials from the monopoly supplier. This is because:
A) the internal price of the raw materials will be greater than the average cost.
B) the internal price of the raw materials will be greater than the marginal cost.
C) the monopoly price is always lower than the average cost.
D) the monopoly price is always greater than the marginal cost.

Question

Quizplus · Accepted Answer

The correct answer is D because a monopoly supplier can set prices above marginal cost due to the lack of competition, making it more expensive for companies to buy raw materials from them rather than acquiring the supplier to obtain materials at marginal cost.

Acquiring a Monopoly Supplier Has to Be More Cost-Effective Than