Question

In: Economics

I. In each of the following two scenarios, what type of transaction is involved? (spot exchange,...

I. In each of the following two scenarios, what type of transaction is involved? (spot exchange, contract, or vertical integration). Explain your answer.

3. XYZ Corporation a big automobile company purchases Mich Tires, a local tire company.

4. Each year LAREDO bell, a new fast food company, has a legal obligation to purchase 0.5 billion pounds of potatoes from AGRI Expert located in San Antonio.

Solutions

Expert Solution

Answer:

1. Vertical Integration

Vertical integration means a target company has its own manufacturing plants and store brands. The company will create, distrubute and sell the product.

So, here ABC company is producing its own ingredients to make its product-Burger very popular. So, it suits vertical integration definition, making it the right answer choice.

2. Contract

XYZ corporation which is a big automobile company has purchased 4 million dollars of tires from Mich, a local tire company. By definition contract means, it is a promise made orally or in written agreement between two parties, who agree to do something in favour of each other.

it could be sale, employment or tenacy. In this case, one party gave the product and other party gave money in return to that. So, right

It couldn't be spot exchange because by definition the term spot exchange means to buy one currency against selling another currency, but not product.

In the given situation, only one currency i.e. dollar is mentioned and no other currency topic mentioned. So, wrong.

NOTE:PLEASE 'UPVOTE' IF YOU LIKE MY ANSWER AND IF IT HELPED YOU

Rahul Sunny answered 6 months ago
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