Financial intermediaries reduce transactions costs by
A)charging fees to small savers.
B)charging fees to small investors.
C)taking advantage of economies of scale.
D)avoiding risky investments.

Question

Quizplus · Accepted Answer

Financial intermediaries, such as banks, can reduce transaction costs through economies of scale, where the fixed costs of providing financial services are spread over a larger number of clients, thereby lowering the per-unit cost. Charging fees to small investors or savers does not necessarily reduce transaction costs, and avoiding risky investments may not necessarily reduce transaction costs either.

Financial Intermediaries Reduce Transactions Costs by