You require a specialized part for your production process, but the requirements of thepart are expected to change frequently.

Subject: Economics    / Accounting

Question #2 (10 points)
For the following scenarios, circle whether you think it would be optimal for the firm to acquireits inputs using a spot market, contract, or vertical integration, and briefly (1-2 sentences)explain why.

a) You are manufacturing a product that requires a motor with a non-standard design. The specifications are, however, straightforward write out.

Circle One: Spot Market / Contract / Vertical Integration

b) You’re a home builder, and you require a large number of nails for construction.

Circle one: Spot Market / Contract / Vertical Integration

c) You require a specialized part for your production process, but the requirements of thepart are expected to change frequently. This would mean costly renegotiation of any contracts you have with the part supplier.

Circle One: Spot Market / Contract / Vertical Integration

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