Future Business Leader Achievments (FBLA) Economics Practice Exam

When two or more firms from completely separate industries combine to form a single firm, what is this called?

1. A conglomerate

2. A horizontal partnership

3. A vertical partnership

4. A corporate charter

The correct answer is: A vertical partnership

The combination of two or more firms from completely separate industries to form a single firm is best described as a conglomerate. A conglomerate is a multifaceted company that operates in different industries, allowing for diversification of investments and reducing the overall risk associated with dependence on a single industry. In contrast, a horizontal partnership refers to the merger of firms that operate in the same industry and often at the same level of production or distribution, which is not applicable here since the firms are from different industries. A vertical partnership involves firms at different stages of production within the same industry, such as a manufacturer and a supplier, which again does not fit the scenario of unrelated businesses merging. A corporate charter is simply a legal document that establishes the existence of a corporation and doesn’t relate to the type of business merger being described. Overall, the correct term for the merger of firms from entirely separate industries is indeed a conglomerate.