Which of the following implies that small FIs are more cost efficient than large FIs, and that in a freely competitive environment for financial services, small FIs may outperform their larger counterparts?
A)Economies of scale.
B)Diseconomies of scale.
C)Economies of scope.
D)Diseconomies of scope.
E)Constant returns to scale.

Question

Quizplus · Accepted Answer

Diseconomies of scale suggest that as a financial institution grows larger, it may become less cost efficient and may not be able to compete as effectively with smaller FIs in a freely competitive environment. This implies that smaller FIs may outperform their larger counterparts.

Which of the Following Implies That Small FIs Are More