Ceteris paribus, which optimal method of input procurement (spot exchange, contracts, or vertical integration) would be...

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Ceteris paribus, which optimal method of input procurement (spot exchange, contracts, or vertical integration) would be...

Ceteris paribus, which optimal method of input procurement (spot exchange, contracts, or vertical integration) would be most likely in each situation? Fill in the blanks.

A low degree of specialization in a simple, easy to predict environment

_______________________________________________

A basic, standardized input

_______________________________________________

A high degree of specialization in a complex, highly unpredictable environment

_______________________________________________

business economics

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Answer 1

Answer #1

1.

Spot exchange

Since it requires low specialization, then it can be procured from any party in a predictable environment.

2.

Vertical integration

Going for the vertical integration, will help one firm to produce inputs that are useful for the production of standardized products.

3.

Contract

It needs contractual agreements between the parties so that highly specialized input is produced consistently. It is only possible when contract takes place.

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Answer 2

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