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Motivating internal suppliers to produce efficiently is easier than motivating other firms If the firm does not use sufficient volume to reach economies of scale,

Motivating internal suppliers to produce efficiently is easier than motivating other firms If the firm does not use sufficient volume to reach economies of scale, the market will be able to produce the input at a lower average cost When the costs of searching for a supplier, negotiating prices, and enforcing contracts is low, firms tend to produce goods internally As the asset becomes more specific, vertical integration is preferred

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