Compulsory Benefit Costs. Columbia Federal Savings & Loan, Inc. offers low-cost home mortgage refinancing services on the Internet. Each refinancing brings the company $250 in fees, and these fees are stable given the competitive nature of Internet marketing. Columbia's relies upon independent contractors (sales associates) who work on a commission-only basis. Weekly total cost (TC) and marginal cost (MC) relations are:

where Q is thousands of refinancing applications processed.
Suppose the US Department of Labor recently ruled that Columbia's sales associates must be considered employees entitled to benefits under the Employee Retirement Income Security Act (ERISA). As a result, Columbia's marginal cost of doing business will rise by $25 per unit. Columbia's fixed expenses, which include a required return on investment, will be unaffected.

Question

Compulsory Benefit Costs. Columbia Federal Savings & Loan, Inc. offers low-cost home mortgage refinancing services on the Internet. Each refinancing brings the company $250 in fees, and these fees are stable given the competitive nature of Internet marketing. Columbia's relies upon independent contractors (sales associates) who work on a commission-only basis. Weekly total cost (TC) and marginal cost (MC) relations are:
 
 where Q is thousands of refinancing applications processed.
Suppose the US Department of Labor recently ruled that Columbia's sales associates must be considered employees entitled to benefits under the Employee Retirement Income Security Act (ERISA). As a result, Columbia's marginal cost of doing business will rise by $25 per unit. Columbia's fixed expenses, which include a required return on investment, will be unaffected.

Quizplus · Accepted Answer

The Answer of Compulsory Benefit Costs. Columbia Federal Savings & Loan, Inc. offers low-cost home mortgage refinancing services on the Internet. Each refinancing brings the company $250 in fees, and these fees are stable given the competitive nature of Internet marketing. Columbia's relies upon independent contractors (sales associates) who work on a commission-only basis. Weekly total cost (TC) and marginal cost (MC) relations are:
 
 where Q is thousands of refinancing applications processed.
Suppose the US Department of Labor recently ruled that Columbia's sales associates must be considered employees entitled to benefits under the Employee Retirement Income Security Act (ERISA). As a result, Columbia's marginal cost of doing business will rise by $25 per unit. Columbia's fixed expenses, which include a required return on investment, will be unaffected.