Which of these motivate a firm to use nonmarket transactions to acquire inputs and downstream services?
A)Zero transaction costs in the spot market
B)Absence of market power
C)Steady supply of the key input used in production
D)Imposition of low tax rates on a particular production unit

Question

Quizplus · Accepted Answer

When a particular production unit is subjected to low tax rates (e.g., subsidies, exemptions), firms may choose to use nonmarket transactions to acquire inputs and downstream services to exploit these favorable conditions. This reduces their dependence on the spot market and provides greater control over the supply chain, which can enhance their competitiveness. Choices A, B, and C do not necessarily motivate firms to use nonmarket transactions, as the absence of transaction costs, market power, or supply chain disruptions can also be achieved through market-based transactions.

Which of These Motivate a Firm to Use Nonmarket Transactions