Question

Determine whether the following transactions involve spot exchange, contracts, vertical integration, conglomerate mergers, horizontal integration, site specificity, physical-asset specificity, dedicated assets or human capital.

Bob, the owner of a bakery, buys his competition.

Bob, the owner of a bakery, hired a pastry chef who is famous for her cakes.

Bob, the owner of a bakery, buys a wheat farm so he can mill his own wheat flour.

Bob, the owner of a bakery, has ovens that are used only to bake the breads and buns of the Grand Hotel, his biggest client.

Bob, the owner of a bakery, occasionally hires Steve, a labourer, to clean his windows.

Choose...physical-asset specifictyconglomerate mergersvertical integrationhuman capitaldedicated assetscontractshorizontal integrationspot exchangesite specificity

Answer 1

Bob, the owner of a bakery, buys his competition
- Horizontal integration
( This is because Bob buys his competition and merges the company. )

Bob, the owner of a bakery, hired a pastry chef who is famous for her cakes
- Human Capital
( This is because the employee is a highly skilled chef famous for her cakes)

Bob, the owner of a bakery, buys a wheat farm so he can mill his own wheat flour.
- Dedicated asset
( This are capital assets solely used to serve a particular purpose. In this case, the purpose being - buying a wheat farm to mill his own wheat.)

Bob, the owner of a bakery, has ovens that are used only to bake the breads and buns of the Grand Hotel, his biggest client.
- Physical asset specificity
( This is because this particular ovens are used to produce certain goods only for a specific customer)

Bob, the owner of a bakery, occasionally hires Steve, a labourer, to clean his windows.
- Contracts
( This are temporary employment binding agreements to ensure that payment is made after a particular task is completed.)