Which of the following best describes Andrew Carnegie's system of vertical integration in the context of economics?

• A. Owning and controlling all stages of production, from raw materials to distribution
• B. Forming cartels to set prices and output levels
• C. Specializing in a single stage of production to increase efficiency
• D. Merging with competitors to reduce market competition

Answer: (A)

Verified step by step guidance

1. Understand the concept of vertical integration: It refers to a firm's ownership and control over multiple stages of production or distribution within the same industry, from raw materials to the final product delivery.
2. Recognize Andrew Carnegie's business strategy: Carnegie was known for controlling every step in the steel production process, including raw material extraction, transportation, manufacturing, and distribution.
3. Compare the options given: Identify which option aligns with owning and controlling all stages of production rather than just specializing, forming cartels, or merging with competitors.
4. Eliminate incorrect options: Forming cartels relates to price-setting agreements, specializing in a single stage is horizontal or focused specialization, and merging with competitors is horizontal integration, not vertical.
5. Conclude that the best description of Carnegie's system is owning and controlling all stages of production, which exemplifies vertical integration.