(I)The Total Cost of Carrying Out a Transaction in Financial

question 2

Multiple Choice

(I) The total cost of carrying out a transaction in financial markets increases proportionally with the size of the transaction.
(II) Financial intermediaries facilitate diversification when an investor has only a small sum to invest.

• A) (I) is true; (II) false.
• B) (I) is false; (II) true.
• C) Both (I) and (II) are true.
• D) Both (I) and (II) are false.

---

Definitions:

Comparative Advantage

An economic principle that states that an entity (e.g., country, region, or individual) can produce a good at a lower opportunity cost compared to others, leading to more efficient trading possibilities.

Absolute Advantage

The capacity of a nation, person, corporation, or area to generate a product or offer a service at a per-unit cost that is cheaper than the per-unit cost at which any other party produces the same product or service.

Frederic Bastiat

A French economist, writer, and prominent member of the French Liberal School in the 19th century, known for his advocacy of free trade and the critique of socialism.

Absolute Advantage

The ability of a country, company, or individual to produce a good or provide a service more efficiently than competitors, using the same amount of resources.