If an airplane manufacturer can order its different airplane parts from different suppliers instead of producing the parts internally, consequences are
That’s correct. With in-house production the airplane manufacturer’s unit costs would vary with the output needed, whereas with outside purchasing unit costs are always equal to the agreed price (independent of the volume).
That’s exactly right. Independent suppliers have greater incentives to lower costs due to fierce competition and higher incentives for lowering costs.
That’s exactly right. In the lecture we had the example of BMW: BMW can order from Bosch and Lucas Varity and this way the firm can spread its risk.
High bureaucracy costs.