Simon Estimates That the Fixed Costs Associated with Opening a New

question 5

Multiple Choice

Simon estimates that the fixed costs associated with opening a new bank branch are $500,000. He expects the branch to attract 1,000 new customer accounts in the first year, each of which will cost $50 per year to service. He also expects to generate $100,000 per year in revenue. For Simon, the total cost of opening the new branch and remaining open for one year will be

• A)$500,000.
• B)$550,000.
• C)$650,000.
• D)$450,000.
• E)$605,000.

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Definitions:

World Price

The price of a good or service on the international market, shaped by the global forces of supply and demand.

Domestic Price

The cost of products or services in a country, affected by domestic demand and supply factors.

Tariff

A tax or duty to be paid on a particular class of imports or exports, often used as a tool for trade policy.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specified time period.