Suppose One Firm Buys Cattle to Process Only the Skins

question 118

Multiple Choice

Suppose one firm buys cattle to process only the skins for leather, and another firm buys cattle to process only the meat for food. If the two firms merged, they would experience

• A)increasing returns.
• B)economies of scale.
• C)economies of scope.
• D)increasing marginal product.
• E)decreasing marginal cost.

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Definitions:

Market Price

Market price is the current price at which a security or commodity can be bought or sold in a public market.

Security

A financial instrument representing an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.

Direct Private Long-term Debt Financing

A funding method where businesses borrow money directly from private investors, bypassing traditional bank loans, usually for a period longer than one year.

Public Issues

The offering of securities by a company to the public in order to raise capital.