The manager of Steel Works learns of a new technological interdependency between the final stage of production and the distribution of the final product. Steel Works currently contracts with another firm to distribute the product. If Steel Works vertically integrates with the distributor firm, which of the following is true?
A) Steel Works is likely to incur managerial diseconomies as a result of an increase in the complexity of the firm.
B) With certainty, the combined firm will earn greater economic profits.
C) Steel Works will not incur managerial diseconomies.
D) Steel Works will automatically create an internal successive monopoly.
A) Steel Works is likely to incur managerial diseconomies as a result of an increase in the complexity of the firm.
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What will be an ideal response?
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