Question 42
Business OrganisationsFirms embark on vertical integration in order to
- A.reduce advertisement and marketing cost.
- B.enjoy economies of large-scale production.
- C.take over markets formally controlled by other firms.
- D.prevent other firms from entering the market.
Show the answer and explanation
Answer: B (enjoy economies of large-scale production.)
Explanation
Joining firms at different stages of production makes one larger firm that enjoys economies of scale, e.g. cheaper supplies.