Which of the Following Is the Most Significant Disadvantage of Franchising

question 46

Multiple Choice

Which of the following is the most significant disadvantage of franchising?

• A) high start-up costs
• B) risk of failure
• C) difficulty in obtaining financing
• D) lengthy contracts
• E) high cost of operation

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Definitions:

Marginal Product

The additional output that is produced by using one more unit of a factor of production, all other inputs remaining constant.

Profit

Total revenue minus total cost.

Diminishing Marginal Product

The principle that as more of a variable input is added to a fixed input, the additional output produced from each new unit of input will eventually decrease.

Production Function

A production function describes the relationship between inputs used in production and the output generated from those inputs.