Investments in specialized assets tend to incur high opportunity costs because the
A) assets can be profitably used for multiple purposes.
B) threat of one of the partners pursuing his or her self-interest is high.
C) social costs associated with these assets are high.
D) firms can avoid backward integration by investing in these assets.

Question

Quizplus · Accepted Answer

Making a specialized investment opens up the threat of opportunism by one of the partners. Opportunism is defined as self-interest seeking with guile. Backward vertical integration is often undertaken to overcome the threat of opportunism and in securing key raw materials.

Investments in Specialized Assets Tend to Incur High Opportunity Costs