A firm that purchases peak production capability from other companies so that internal production remains level and can be done cheaply is using subcontracting.

Question

Quizplus · Accepted Answer

Subcontracting is a common practice where a firm hires other companies to produce some of its components or services. This allows the firm to maintain a level of production without investing in additional resources, equipment, or labor. By outsourcing peak production capabilities to other companies, the firm can focus on its core competencies and reduce costs.

A Firm That Purchases Peak Production Capability from Other Companies