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.

Assume a third FI (company C)operates in the same market with two FIs,and it has $800 million in assets and total costs of $420 million.What can you conclude about the cost structure of the FIs in this market?
A)There are significant economies of scale because companies A,B,and C coexist in the industry.
B)There are no significant economies of scale because both companies A and C are 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 beyond the $500 million asset size.
E)There are no significant economies of scale because the unit costs increase as size increases.

Question

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.

Assume a third FI (company C)operates in the same market with two FIs,and it has $800 million in assets and total costs of $420 million.What can you conclude about the cost structure of the FIs in this market?
A)There are significant economies of scale because companies A,B,and C coexist in the industry.
B)There are no significant economies of scale because both companies A and C are 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 beyond the $500 million asset size.
E)There are no significant economies of scale because the unit costs increase as size increases.

Quizplus · Accepted Answer

The Answer of 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.

Assume a third FI (company C)operates in the same market with two FIs,and it has $800 million in assets and total costs of $420 million.What can you conclude about the cost structure of the FIs in this market?
A)There are significant economies of scale because companies A,B,and C coexist in the industry.
B)There are no significant economies of scale because both companies A and C are 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 beyond the $500 million asset size.
E)There are no significant economies of scale because the unit costs increase as size increases.

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