Considering that, on average, the return on assets is the same for small and large banks, and the return on equity is higher for large banks than small banks, what can be one of the explanations for the trend toward bank mergers?
What will be an ideal response?
The return on assets being the same suggests that large banks may not have any advantage in managing assets than small banks. The fact that large banks have a higher return on equity means that they must have higher leverage. This suggests that there are economies of scale in banking.
You might also like to view...
A monetary policy which is likely to bring about a "soft landing" requires that interest rates be ________ while inflation is ________ and unemployment is ________ the natural level
A) raised, rising, above B) raised, falling, below C) lowered, falling, above D) lowered, rising, below
On average, expansions in the United States have become ________, and recessions have become ________ since 1950
A) longer; longer B) longer; shorter C) shorter; longer D) shorter; shorter
Reducing inflation is a more important objective than economic growth" is an example of
a) Normative economics b) Positive economics c) Objective economics d) Reality economics
You read a story in the newspaper about the "economies of mass production." This means that
A. fixed cost is less at larger levels of production. B. total cost is less at larger levels of production. C. marginal cost is less at larger levels of production. D. long-run average cost is less at larger levels of production.