Question

Elemental Pharma Inc. recently acquired Crick Pharmaceuticals Inc. It now sells its own productsalong with the products originally sold by Crick Pharmaceuticals. As a result, Elemental Pharma'ssales force will also be marketing the acquired company's products. How will this horizontalintegration most likely affect Elemental Pharma?
A. It will lower its costs through economies of scale.
B. It will diminish its economic value creation.
C. Elemental Pharma will increase its cost of distribution.
D. Elemental Pharma will reduce the size of its product line.

Answer 1

Answer:

Option A. It will lower its costs through economies of scale.

Explanation:

The reason is that the sales of both of the companies will increase and cost can be controlled by integration of departments like finance department, distribution department, etc. This will decrease the cost of the product which will be because of higher sales and cost benefits due to integration of department and this higher sales increases the production which reduces the cost. So the option A is correct.