Laredo Bank & Trust uses the janitorial services of ProKleen, which provides necessary cleaning supplies, crew training, background security checks (since the crews work after hours), and all other associated expenses. The other available janitorial services do not provide security checks, so the bank would have to hire guards to watch the janitors. This expense effectively limits the bank to ProKleen's services. This illustrates the concept of
A) High employment costs.
B) Unfavorable supplier status.
C) Favorable quality status.
D) Complementary products.
E) High switching costs.

Question

Quizplus · Accepted Answer

Switching costs are fixed costs buyers face if they change suppliers. In this case, the bank would have to have a permanent security guard, a fixed cost, should it decide to switch from ProKleen to another cleaning service.

Laredo Bank & Trust Uses the Janitorial Services of ProKleen