Answer the following questions with true or false and provid

Answer the following questions with true or false and provide a brief explanation (2- 3 sentences)

a) Economies of scale in production give rise to multi-product firms.

b) ACE Hardware Corporation is an example of economies of scale in production.

c) Large firms are more likely to “buy” inputs than “make” them themselves.

d) High agency/influence costs give rise to vertically integrated firms.

e) A firm engaged in Cournot competition would never want to make a tough commitment.

f) Limit pricing is a structural barrier to entry.

g) The presence of relationship specific assets reduces the cost of buying inputs rather than making them within the firm boundary.

Solution

a) True. Economies of scale means there is a significant saving with the increase in production. Hence when saving increases then it would give rise to multi product firms.
b) True. ACE Hardware corporation has large investments which makes to have increased production with lesser costs
c) True. In order to capture the market, large firms involve in outsourcing and hence reduce the time and investments required.
d) True. Vertical integration is the process of combining more process of production in order to avoid high intermediary costs
e) True. As they take decisions independently of others what they produce
f) True. Limit pricing sets lowest prices which makes difficult for other firms to enter
g) True. As the relation specific assets have their value greater within a relationship than outside.