Which of the following economic characteristics is consistent with a commercial bank?
A) Low barriers to entry.
B) High levels of research and development.
C) Low profit margin on lending activities.
D) Low profit margin on fee-based financial services, such as merger consulting.

Question

Quizplus · Accepted Answer

Commercial banks typically have a low profit margin on lending activities, as their primary income source comes from collecting interest on loans. This is in contrast to investment banks, which may have high profit margins on fee-based services like merger consulting.

Option A is incorrect because commercial banks often have high barriers to entry due to regulatory requirements and the need for significant capital.

Option B is generally associated with industries requiring significant innovation or technology, which is not a major factor in commercial banking.

Option D is incorrect because commercial banks typically generate most of their revenue from lending activities, not fee-based financial services.

Which of the Following Economic Characteristics Is Consistent with a Commercial