Calculation of Average Costs with Economies of Scope Dee's Dry

question 63

Multiple Choice

Calculation of Average Costs with Economies of Scope Dee's Dry Cleaning is considering a merger with Larry's Laundry Supply Stores. Dee's total operating costs of producing services are $600,000 for sales volume of $4 million. Larry's total operating costs of producing services are $200,000 for a sales volume (J_P) of $1 million. For a sales volume of $5 million, calculate the reduction in production costs the merged firms need to experience such that the total average cost (TAC) for the merged firms is equal to 10%.

• A) decrease of $500,000
• B) decrease of $300,000
• C) decrease of $100,000
• D) decrease of $200,000

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Definitions:

Investor Has Control

This indicates a situation where an investor has significant influence over the management and operations of a company, often through ownership of a majority of voting shares.