Banks Can Lower the Cost of Information Production by Applying

question 107

Multiple Choice

Banks can lower the cost of information production by applying one information resource to many different services. This process is called

• A)economies of scale.
• B)asset transformation.
• C)economies of scope.
• D)asymmetric information.

---

Definitions:

Excess Burdens

The economic inefficiencies or losses that result from imposing taxes or government policies.

Principle of Second Best

An economic theory that suggests when a condition for a perfect market cannot be met, the next-best solution may involve violating another condition to improve efficiency.

Distortionary Tax

A tax that causes people to alter their behavior and make different economic decisions than they would in a free market, potentially leading to inefficiency.

Efficiency

The extent to which resources are utilized optimally to achieve desired outcomes with minimum waste or effort.