BPM Corp Is a Manufacturer of Radar Systems for Regional-Sized Jet

question 66

Multiple Choice

BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following is an accurate interpretation of this announcement?

• A) BPM will own more than 50 percent of the venture and a new company will be formed.
• B) J3 will own more than 50 percent of the venture and a new company will be formed.
• C) BPM and J3 will both own 50 percent of the venture and a new company will be formed.
• D) BPM and J3 will both own 50 percent of the venture but no new company will be formed.

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Definitions:

Free-rider Problem

A situation where individuals consume goods or services without paying for them, which typically occurs with non-excludable and non-rival public goods.

Market Resources

The assets, materials, and inputs used to produce goods and services and are made available through the market.

Entrepreneurs

Individuals who innovate, finance, and manage business ventures, often taking on greater than normal financial risks.

External Cost

Costs that a producer or consumer inflicts on a third party who is not involved in the production or consumption of the goods or services.