Answered: 2 What mathematical form of cost…

2 What mathematical form of cost function would be most appropriate to use to test the existence of economies of scale in banking?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 39P: How much money do you have to put into a bank account that pays 10% interest compounded annually to...

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2 What mathematical form of cost function would be most appropriate to use to test the existence of economies of scale in banking?
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Why are banks called financial intermediaries?
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What is the asset-liability time mismatch that all banks face?
What do the authors mean when they state that financial intermediaries can achieve economies of scale with respect to transaction costs? A. Intermediaries can spread transaction costs across larger transaction volumes, so the cost per unit is lower. B. Intermediaries tend to specialize in certain types of transactions, so their costs are lower because they operate at lower volume than other types of financial firms.
There are various theoretical reasons why economies of scale should occur in the banking industry: 1 Specialization of labour. There is considerable scope for this as cashiers, loan officers, account managers, foreign exchange managers, investment analysts and programmers can all increase their productivity with increased volume of output. 2 Indivisibilities. Banks make use of much computer and telecommunications technology. Larger institutions are able to use better equipment and spread fixed costs more easily. 3 Marketing. Much of this involves fixed costs, in terms of reaching a given size of market; large institutions can again spread these costs more easily. 4 Financial. Banks have to raise finance, mainly from depositors. Larger banks can do this more easily and at lower cost, meaning that they can afford to offer their depositors lower interest rates. There are also reasons why banks should gain from economies of scope; many of their products are related and banks have…
There are various theoretical reasons why economies of scale should occur in the banking industry: 1 Specialization of labour. There is considerable scope for this as cashiers, loan officers, account managers, foreign exchange managers, investment analysts and programmers can all increase their productivity with increased volume of output. 2 Indivisibilities. Banks make use of much computer and telecommunications technology. Larger institutions are able to use better equipment and spread fixed costs more easily. 3 Marketing. Much of this involves fixed costs, in terms of reaching a given size of market; large institutions can again spread these costs more easily. 4 Financial. Banks have to raise finance, mainly from depositors. Larger banks can do this more easily and at lower cost, meaning that they can afford to offer their depositors lower interest rates. There are also reasons why banks should gain from economies of scope; many of their products are related and banks have…
There are various theoretical reasons why economies of scale should occur in the banking industry: 1 Specialization of labour. There is considerable scope for this as cashiers, loan officers, account managers, foreign exchange managers, investment analysts and programmers can all increase their productivity with increased volume of output. 2 Indivisibilities. Banks make use of much computer and telecommunications technology. Larger institutions are able to use better equipment and spread fixed costs more easily. 3 Marketing. Much of this involves fixed costs, in terms of reaching a given size of market; large institutions can again spread these costs more easily. 4 Financial. Banks have to raise finance, mainly from depositors. Larger banks can do this more easily and at lower cost, meaning that they can afford to offer their depositors lower interest rates. There are also reasons why banks should gain from economies of scope; many of their products are related and banks have…
There are various theoretical reasons why economies of scale should occur in the banking industry: 1 Specialization of labour. There is considerable scope for this as cashiers, loan officers, account managers, foreign exchange managers, investment analysts and programmers can all increase their productivity with increased volume of output. 2 Indivisibilities. Banks make use of much computer and telecommunications technology. Larger institutions are able to use better equipment and spread fixed costs more easily. 3 Marketing. Much of this involves fixed costs, in terms of reaching a given size of market; large institutions can again spread these costs more easily. 4 Financial. Banks have to raise finance, mainly from depositors. Larger banks can do this more easily and at lower cost, meaning that they can afford to offer their depositors lower interest rates. There are also reasons why banks should gain from economies of scope; many of their products are related and banks have…
There are various theoretical reasons why economies of scale should occur in the banking industry: 1 Specialization of labour. There is considerable scope for this as cashiers, loan officers, account managers, foreign exchange managers, investment analysts and programmers can all increase their productivity with increased volume of output. 2 Indivisibilities. Banks make use of much computer and telecommunications technology. Larger institutions are able to use better equipment and spread fixed costs more easily. 3 Marketing. Much of this involves fixed costs, in terms of reaching a given size of market; large institutions can again spread these costs more easily. 4 Financial. Banks have to raise finance, mainly from depositors. Larger banks can do this more easily and at lower cost, meaning that they can afford to offer their depositors lower interest rates. There are also reasons why banks should gain from economies of scope; many of their products are related and banks have…
There are various theoretical reasons why economies of scale should occur in the banking industry: 1 Specialization of labour. There is considerable scope for this as cashiers, loan officers, account managers, foreign exchange managers, investment analysts and programmers can all increase their productivity with increased volume of output. 2 Indivisibilities. Banks make use of much computer and telecommunications technology. Larger institutions are able to use better equipment and spread fixed costs more easily. 3 Marketing. Much of this involves fixed costs, in terms of reaching a given size of market; large institutions can again spread these costs more easily. 4 Financial. Banks have to raise finance, mainly from depositors. Larger banks can do this more easily and at lower cost, meaning that they can afford to offer their depositors lower interest rates. There are also reasons why banks should gain from economies of scope; many of their products are related and banks have…