Flotation Costs Are

question 123

Multiple Choice

Flotation costs are:

• A)insignificant and can be assumed away.
• B)the difference between the bid-ask spread on the sale of the security.
• C)commissions to the underwriting firm that floats the issue.
• D)None of these answers is correct.

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Definitions:

Economies of Scale

The cost advantage that arises with increased output of a product due to spreading fixed costs over more units of production.

Minimum Efficient Scale

The smallest level of production a firm can achieve while still taking full advantage of economies of scale regarding costs per unit.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a reduction in average costs with increased output.