Chapter 1, Problem 1QA

Why do larger financial intermediaries tend to have lower transaction costs?   A. Diseconomies of scale   B. Economies of scale

Which of the following statements is true about agency efficiency?   a.  The costs from vertical integration exceed the costs from market exchange at low levels of asset specificity.   b.  The costs from vertical integration always exceed the costs from market exchange.   c.  The costs from vertical integration exceed the costs from market exchange at high levels of asset specificity.   d.  The costs from vertical integration are always less than the costs from market exchange.

Which of the following is a disadvantage of outsourcing? Group of answer choices A. freeing up capacity B. freeing up capital C. transferring production and technology risks D. limiting ability to upsize or downsize production