A firm that diversifies by exploiting its resources and capability advantages in its original business will have costs than (as) firms that begin a new business without these resource and capability advantages, or revenues than (as) firms lacking these advantages.

A firm that diversifies by exploiting its resources and capability advantages in its original business will have LOWER costs than (as) firms that begin a new business without these resource and capability advantages, or HIGHER revenues than (as) firms lacking these advantages.

Explanation:

The logic behind this statement is that an existing firm that decides to expand its operations will probably have lower costs than a competing firm that is just starting to operate.

E.g. you manage a restaurant and decide to offer catering services for weddings. You figure out that since you already have most of the equipment and the necessary experience, it should be easy for you. No one can guarantee that you will be successful but something is for sure, it is much cheaper for a restaurant to expend into the catering business, than it is for a new company to start offering catering services.

Also, the second point where revenues should be higher, refers to the fact that a consolidated business has a brand and a reputation behind it, and if that reputation is good, then it should be able to sell more than new entrants.

We can go back to the catering business. If you need catering services for a wedding, will you feel more conformable with a good restaurant providing the service, or would you take the risk of hiring a new company that no one has ever heard about. And probably, the established company charges a lower price which is an unbeatable combination, experience + lower price.

the answer is a. $209,000