Which of the following is a disadvantage of vertical integration?

Question

Quizplus · Accepted Answer

When a firm vertically integrates, goods may be transferred between different subunits within the firm. This can make it difficult to set appropriate prices for those goods, as the subunits must negotiate their own prices instead of relying on market prices. This can lead to inefficiencies and cause the firm to potentially lose out on profits.

The other options listed are not necessarily disadvantages of vertical integration. For example, options A and D can actually be advantages of vertical integration, as it allows the firm to protect its proprietary technology and make investments in specialized assets. Option B may or may not be a disadvantage depending on the specific circumstances of the firm, and option E is actually a potential advantage of vertical integration, as it allows the firm to exercise tight control over its production process.

Which of the Following Is a Disadvantage of Vertical Integration