Explain briefly why U.S. Steel prefers to own its mines, ...

[bobbysung]

Explain briefly why U.S. Steel prefers to own its mines, enrichment facilities, and ore carriers.

Question 2

If economic profits are zero
 A) accounting profits is less than the cost of capital.
  B) accounting profit is just covering the cost of capital.
  C) the cost of capital is negative.
  D) the entrepreneur should go to his/her next best alternative.

[Smiles0805]

Answer to Question 1

Transaction costs, uncertainty, and risks of opportunism can also explain why U.S. Steel owns its mines, enrichment facilities, and ore carriers. First, blast furnace owners also face volumetric risk in iron ore and coke. Second, a scarcity of alternative producers who can supply U.S. Steel's desired volumes makes the ore market thin, with less predictable prices and heightened deliverability risk. Third, owning an enrichment facility allows U.S. Steel to ensure itself a supply of taconite with specifications best suited to its operations. It might also be easier to coordinate operations of the mine and enrichment plant than if they have different owners. Fourth, the costs of mining, loading, and shipping ore are lower if ships and docking facilities are customized.

Answer to Question 2

B