Consider the Following Two FIs: Company a Has $500 Million

question 46

Multiple Choice

Consider the following two FIs: Company A has $500 million in total assets and total costs equal to $200 million. Company B has $60 million in total assets and total costs equal to $24 million.
What can you conclude about the cost structure of the market consisting of the two FIs?

• A) There are significant economies of scale because both companies A and B coexist in the industry.
• B) There are no significant economies of scale because company A is much larger than company B.
• C) There are no significant economies of scale because the unit costs are constant.
• D) There are significant economies of scale because the unit costs decline as size increases.
• E) There are no significant economies of scale because the unit costs increase as size increases.

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Definitions:

Gross Income

The total income earned by an individual or a business before any deductions or taxes are taken out.

Political Subdivision

An administrative division of a country that is granted certain powers and responsibilities by legislation, such as a city, county, or district.

Constructive Receipt

A tax principle that taxes income individuals have earned but not yet received, based on the availability without substantial restriction.

Control

Refers to the power to influence or direct people's behavior or the course of events.