Economies of Scope a Survey of a Local Market Has

question 38

Multiple Choice

Economies of Scope A survey of a local market has provided the following average cost data: Johnson Construction Corp. (JCC) has assets of $5 million and an average cost of 15 percent. Anderson Architects (AA) has assets of $8 million and an average cost of 20 percent. Cole Home Builders (CHB) has assets of $8 million and an average cost of 17 percent. For each firm, average costs are measured as a proportion of assets. JCC is planning to acquire AA and CHB with the expectation of reducing overall average costs by eliminating the duplication of services. If JCC plans to reduce operating costs by $300,000 after the merger, what will the average cost be for the new firm?

• A) 16.238%
• B) 15.00%
• C) 17.33%
• D) 17.667%

---

Definitions:

Emotional Attachment

The emotional bond between two individuals, marked by feelings of closeness, security, and affection.

Identification

Identification is the process of associating oneself closely with groups, values, or symbols, often influencing behavior and attitudes.

Involvement

The degree of personal interest and engagement an individual exhibits toward a task, role, or organization, often affecting their performance and satisfaction.

Job Performance

The level to which an individual executes their job responsibilities and tasks.