Questions from Financial Markets

Q: How can economies of scale help explain the existence of financial intermediaries

How can economies of scale help explain the existence of financial intermediaries?

Q: Describe two ways in which financial intermediaries help lower transaction costs in

Describe two ways in which financial intermediaries help lower transaction costs in the economy.

Q: Would moral hazard and adverse selection still arise in financial markets if

Would moral hazard and adverse selection still arise in financial markets if information were not asymmetric? Explain.

Q: How do standard accounting principles help financial markets work more efficiently?

How do standard accounting principles help financial markets work more efficiently?

Q: Why are financial markets important to the health of the economy?

Why are financial markets important to the health of the economy?

Q: Do you think the lemons problem would be more severe for stocks

Do you think the lemons problem would be more severe for stocks traded on the New York Stock Exchange or those traded over the counter? Explain.

Q: Which firms are most likely to use bank financing than to issue

Which firms are most likely to use bank financing than to issue bonds or stocks to finance their activities? Why?

Q: How does the provision of several types of financial services by one

How does the provision of several types of financial services by one firm lead to conflicts of interest?

Q: How can conflicts of interest make financial service firms less efficient?

How can conflicts of interest make financial service firms less efficient?

Q: How does spinning lead to a less efficient financial system?

How does spinning lead to a less efficient financial system?