Which of the Following Statements Is True About a Franchise

question 2

Multiple Choice

Which of the following statements is true about a franchise agreement?

• A) The franchisee is free to modify the franchisor's products.
• B) The franchisee can consult the franchiser for managerial and financial help.
• C) The franchisee and not the franchiser takes the responsibility of marketing and advertising activities.
• D) The franchisee can keep all the profits made by the venture.
• E) The franchisee does not have to pay a start-up cost for the venture.

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Definitions:

Long-Run Minimum Cost

The lowest cost at which a firm can produce any given level of output in the long run when all inputs are variable.

Average Total Cost Curve

A graphical representation of the total cost (fixed plus variable) per unit of output produced, plotted against different levels of output.

Short-Run

A period in which at least one factor of production is fixed, and firms can only partially adjust their output levels.

Long-Run Minimum Cost

The lowest cost at which a firm can produce any given level of output in the long run, when all inputs can be varied.