CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Internal (operational) efficiency means that a market ______

A. has low transaction costs for buyers and sellers.
B. is highly automated, and few persons are required to operate the market.
C. can process a large number of transactions during a trading session.
D. reports prices of completed trades in a quick and timely manner.
Correct Answer: A

Although the other characteristics are nice, and we commonly associate them with modern, efficient markets, they are not necessary for a market to be internally (operationally) efficient. Efficiency in this context refers to the mechanical operation of the market and is analogous to the efficiency of a machine. A machine need not be large, fast, or require few operators to be efficient. It only needs to produce its output at the lowest possible cost.

User Contributed Comments 2

User Comment
Creg operation = cost
soarer1 nice one
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