When a firm establishes a long-term contract with another firm that is characterized by common ownership of a supplier with another firm, this is a:
A) standard supply contract.
B) joint venture.
C) lease contract.
D) franchise agreement.

Question

Quizplus · Accepted Answer

A joint venture involves two or more firms forming a new entity to pursue a business opportunity together. In this scenario, the common ownership of a supplier by both firms suggests that they are collaborating on a mutually beneficial project, which is the essence of a joint venture. A standard supply contract is a simple agreement for a one-time or short-term purchase of goods or services, while a lease contract is an agreement for the use of a property or asset. A franchise agreement is a type of licensing agreement in which one company grants another company the right to use its brand name, products, and services in exchange for a fee or royalties, which does not fit the description in the question.

When a Firm Establishes a Long-Term Contract with Another Firm