Financial intermediaries can substantially reduce transaction costs per dollar of transactions because their large size allows them to take advantage of
A) poorly informed consumers.
B) standardization.
C) economies of scale.
D) their market power.

Question

Quizplus · Accepted Answer

Financial intermediaries can achieve economies of scale due to their large size, which means they can spread their fixed costs over a larger number of transactions. As a result, the transaction costs per dollar of transactions are reduced. This allows financial intermediaries to offer lower costs to their customers and still maintain profitability. Therefore, the correct answer is C, economies of scale.

Financial Intermediaries Can Substantially Reduce Transaction Costs Per Dollar of Transactions