Question

Question 3 - The fact that a financial intermediary can hire a lawyer to write one contract that works for many customers, thereby reducing transactions costs, is an example of:

-The law of diminishing marginal returns

-The law of increasing opportunity cost

-The law of demand

-Economies of scale

Answer 1

Option 4

Economics of scale

A diminishing return is decreasing per input-output as input increases, but here output is increasing with the given inputs or one more input both.

Increasing opportunity cost is giving up more or forgone more production to produce, but here it is producing more without increasing the opportunity cost of it.

Law of demand is completely irrelevant in this case, as it says that the increase in price decreases quantity and vice verse when other things are constant.

Economics of scale means increasing production decreases ATC of the good or increasing market share of target consumer decreases ATC of service

here it is a service and that increasing its target consumer with the same product, so the ATC decreases, and that is called economies of scale.