Information costs
A)are the costs of buying and selling financial claims.
B)include the costs that savers incur to determine the credit worthiness of borrowers.
C)include the costs borrowers incur to discover the best investments to make with the money they have borrowed.
D)are zero in financial markets, but high for transactions carried out through financial intermediaries.

Question

Quizplus · Accepted Answer

Information costs include the costs incurred by savers to evaluate the credit worthiness of borrowers, such as credit checks and background research. Option A refers to transaction costs, while option C refers to search costs. Option D is incorrect as information costs exist in all financial markets, not just for transactions carried out through financial intermediaries.

Information Costs