The marginal cost of financial transactions rises with the volume of financial transactions due to
A) congestion.
B) power failure.
C) perceived instability of banks.
D) reserve requirements.
E) bank failure.

Question

Quizplus · Accepted Answer

When the volume of financial transactions increases, it can lead to congestion in financial markets, which in turn raises the marginal cost of transactions. This is because the processing time and costs for each transaction may increase due to the high volume of transactions taking place at the same time. The other options listed, such as power failure or bank failure, may also increase transaction costs, but they are not directly related to the volume of transactions. Reserve requirements may affect the availability of funds for transactions, but they typically do not directly impact transaction costs. The perceived instability of banks may lead to a decrease in the overall volume of financial transactions, but it does not directly impact transaction costs.

The Marginal Cost of Financial Transactions Rises with the Volume