Answer the following statements true (T) or false (F)
1) Vertical integration can increase and decrease a firm's costs.
2) If all stages of production occur within a vertically integrated firm, the firm has no taxable transactions during production.
3) Costs incurred in imposing compliance with a contract between an upstream firm and a downstream firm are considered to be monitoring costs.
4) If an upstream firm and a downstream firm have a long-term contract regarding the price of an input, a change in the market price of the input can result in either the upstream or downstream firm to incur an opportunity cost.
5) If the vertical integration between two firms creates greater managerial diseconomies than cost savings, the merger will increase the combined firm's overall costs.
1) TRUE
2) TRUE
3) FALSE
4) TRUE
5) TRUE
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