Which of the following is an example of the economies of scale argument for increased profits for large financial holding companies?
A) Financial holding companies offer a wide array of services under one name.
B) Financial holding companies need only one CEO, one Board of Directors, and one accounting system regardless of size.
C) Financial holding companies are well diversified so risk is reduced.
D) The profitability of financial holding companies does not rely on one particular line of business.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale. Choice B highlights this by pointing out that regardless of the size of the financial holding company, it requires only one CEO, one Board of Directors, and one accounting system, which reduces administrative costs per unit of service or product as the company grows.

Which of the Following Is an Example of the Economies