BS 9 Advantages of a Firm--Key

# BS 9 Advantages of a Firm--Key - How much will it cost the...

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201 Advantages of a Firm BS 9 Advantages of a Firm--Key How many Transactions? Market (M*N) no firm exists/ does not open the restaurant Firm (M+N) opens a wocket factory/ a firm exists How much is the Transaction cost? Transactions*cost 1. A wocket is made using 10 factors of production . P.D. Eastman estimates the consumer market for wockets in downstate Illinois is 5,000. Transaction costs are \$3. How much will transaction costs be if P.D. Eastman opens a wocket factory? a. \$150,000 b. \$15,030 c. \$50,000 d. \$5,010 e. None of the above 2. Tom is considering opening a restaurant in a small southern Illinois town. Tom’s specialty is jambalaya, which he serves family-style (i.e. one serving dish for the whole table). The recipe for jambalaya includes 10 ingredients. Tom estimates that each of the 300 families in the area would come to his restaurant twice a year to eat jambalaya rather than make it at home. Contracting costs average \$2 per transaction.
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Unformatted text preview: How much will it cost the community to eat jambalaya twice a year if Tom does not open the restaurant? a. (300 x 10 x 2) = \$ 6,000 b. 2 x (300 x 10 x 2) = \$12,000 c. (300 + 10) = \$ 310 d. 2 x (300 + 10) = \$ 620 e. none of the above 3. A certain product is comprised of 10 factors of production. The market in which this product is used has 100 customers. Transaction costs in this market are \$5 per transaction. How many transactions will take place in this market if no firm exists ? a. 10 x 100 b. 10 + 100 c. (10 x 100) x 5 d. (10 + 100) x 5 e. None of the above 4. A certain product is comprised of 10 factors of production. The market in which this product is used has 100 customers. Transaction costs in this market are \$5 per transaction. How much is the total transaction cost in this market if a firm exists ? a. 10 x 100 b. 10 + 100 c. (10 x 100) x 5 d. (10 + 100) x 5 e. None of the above...
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