Question

Which of the reasons below may motivate Orange Inc. to buy plastic parts from your plastic production business through market transactions, rather than producing those parts by itself? Multiple answers may apply so pick all possible answers.

		A) Your business supplies plastic parts to many downstream businesses and enjoys economies of scale; it will take a long time for Orange Inc. to enter that plastic parts market and secure enough buyers to reach a high enough output level
		B) Orange Inc. has concerns that you may hold them up, by not delivering in a timely manner or renegotiate contracts when other buyers are available
		C) Your plastic business owns a set of patents that allow you to produce plastic parts with substantially lower variable cost, so that you can offer products priced lower than competitors
		D) Since your workers have accumulated lots of experience producing plastic parts, the average cost is lower and you are able to sell them at a lower price than what would cost Orange Inc. to make by itself

Answer 1

Option A, C and D

The options mentioned above provides advantages for Orange Inc to buy plastic parts rather than involve in own production.