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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.
What can you conclude about the cost structure of the market consisting of the two FIs?
A. There are significant economies of scale because both companies A and B coexist in the industry.
B. There are no significant economies of scale because company A is 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 because the unit costs decline as size increases.
E. There are no significant economies of scale because the unit costs increase as size increases.
Answer
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