The presence of minimal specialized investments relative to contracting costs suggests that the optimal input procurement method is:
A) spot exchange.
B) vertical integration.
C) contract.
D) vertical integration or contract.

Question

Quizplus · Accepted Answer

Minimal specialized investments imply that the inputs being procured are easily available in the market and there is no need for any long-term relationships or investments. In such a scenario, spot exchange is the best input procurement method as it allows for quick and easy transactions with minimal transaction costs. Vertical integration and contracts are better suited when there are specialized investments involved or when there is a need for long-term relationships with suppliers.

The Presence of Minimal Specialized Investments Relative to Contracting Costs