When First Rate National Bank screens, evaluates, and monitors loan applicants to see if they are creditworthy, it is acting to reduce their transaction costs.

Question

Quizplus · Accepted Answer

The bank is acting to reduce its credit risk, not transaction costs. Transaction costs refer to the costs of making an economic exchange, while evaluating and monitoring loan applicants is about assessing and mitigating the risk of loan default.

When First Rate National Bank Screens, Evaluates, and Monitors Loan