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

question 102

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:

Prospect Theory

A psychological theory that describes how people make decisions based on perceived gains rather than actual losses, impacting risk-taking behavior.

Perceptual Blinders

Cognitive biases or limitations that prevent individuals from fully understanding or accurately perceiving various situations or the viewpoints of others.

Employee Involvement

The practice of empowering employees by encouraging them to contribute ideas and participate in decision-making processes affecting their work.

Union-Management

The relationship, negotiations, and agreements between labor unions and employers regarding worker conditions, compensation, and rights.