What limits the entire economy from being served by one gigantic firm that produces everything?
What will be an ideal response?
The answer lies in investment incentives. Vertical integration is helpful only when firms have firm-specific assets. However, there are lots of nonspecific assets, and for these, long-term contracts are better and more efficient. That is why catering, trucking, copying and cleaning are outsourced, as they are not firm-specific.
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Inventories help manufacturers cope with unexpected changes in the supply of their resources or in the demand for their products
a. True b. False Indicate whether the statement is true or false
Mary wants to open her own taco stand. Which of the following will probably happen?
a. She will start up her business in a year because she has to wait to get government approval. b. She will start up her business in a month because of low cost and ease of entry. c. She will take six months to start her business because of all the government certificates she has to get. d. She will take three months to start her business because she has to borrow to pay start-up fees.
Market power can cause market failure if it results in a misallocation of resources.
Answer the following statement true (T) or false (F)
Rent control leads to quantity supplied being ________ quantity demanded.
A. equal to B. greater than C. less than D. Either equal to or greater than is correct.