Question

A producer of ballpoint pens has been purchasing ink from an ink supplier and is considering acquiring the ink supplier. Would the pen company be more or less likely to vertically integrate by buying the ink manufacturer if the government imposes an ink sales​ tax?

Answer 1

It will be more likely to integrate for avoiding the sales tax.

Answer 2

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Step-by-step explanation:

The producer of ballpoint pens would be more likely to acquire the ink supplier if the government were to impose an ink sales tax. This is because vertical integration would allow the producer to avoid paying the sales tax. Vertical integration refers to an arrangement in which the whole supply chain is owned by a particular company. This means that the company that acquired the supply chain can combine the different entities in order to satisfy all or several of its needs.