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Question
The following information is available on the average costs of the three major banks in a given local market. Bank A has assets of $10 million and average costs are 15 percent, Bank B has assets of $20 million and average costs of 13 percent while Bank C has assets of $30 million with average costs of 12 percent. Average costs are measured as a proportion of total assets.
By how much should operating costs of the combined entity (Bank A + Bank B) be reduced in order to stay competitive in the local market, ceteris paribus?
A. $900,000.
B. $600,000.
C. $500,000.
D. $400,000.
E. $300,000.
Answer
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