Final answer:
Banks exploit economies of scale from a technical relationship by using their size and resources to perform tasks more efficiently and at a lower cost. For example, larger banks can invest in advanced technology and automated systems to process deposits and loans more quickly and accurately.
Step-by-step explanation:
Banks exploit economies of scale from a technical relationship by utilizing their large size and resources to perform tasks more efficiently and at a lower cost. For example, when processing deposits, a larger bank can invest in state-of-the-art technology and automated systems to handle a higher volume of transactions quickly and accurately. This reduces the per-unit cost of processing deposits, allowing the bank to achieve cost savings and increase profitability.
Similarly, in the case of loans, larger banks can take advantage of the economies of scale by streamlining their lending processes and reducing administrative costs. They can afford to invest in sophisticated credit assessment models and risk management systems, enabling them to process loan applications more efficiently and make informed lending decisions. This efficiency allows them to offer competitive interest rates and attract borrowers.