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8.2 Transaction Costs
The current structure of financial markets can be best understood as the result of attempts by
financial market participants to ____.
A) adapt to continually changing government regulations
B) deal with the great number of small firms in the United States
C) reduce transaction costs
D) cartelize the provision of financial services
Answer: C
Diff: 1 Type: MC Page Ref: 164
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
The two ways financial intermediaries can reduce transactions costs are ____ and
____.
A) economies of scale; expertise
B) moral hazard; adverse selection
C) direct finance; indirect finance
D) stocks; bonds
Answer: A
Diff: 1 Type: MC Page Ref: 164
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
The reduction in transactions costs per dollar of investment as the size of transactions
increases is known as ____.
A) discounting
B) economies of scale
C) economies of trade
D) diversification
Answer: B
Diff: 1 Type: MC Page Ref: 164
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard