Explanation

Operational efficiency in a financial system refers to the low cost of arranging trades and conducting transactions. This includes factors such as:

• Low transaction costs
• Minimal bid-ask spreads
• Efficient clearing and settlement systems
• Fast execution of trades

Let's analyze each option:

Option A: "the costs of arranging trades are low." ✅ CORRECT This directly defines operational efficiency. When transaction costs are low, the system is operationally efficient.

Option B: "asset and contract prices reflect all available information." ❌ INCORRECT This describes informational efficiency (or market efficiency), not operational efficiency. Informational efficiency means prices fully reflect all available information.

Option C: "an economy's resources are used where they are most valuable." ❌ INCORRECT This describes allocational efficiency, which occurs when capital flows to its most productive uses. Allocational efficiency ensures resources are allocated to their highest-valued uses.

Key Distinctions:

1. Operational Efficiency: Low transaction costs
2. Informational Efficiency: Prices reflect all information (Efficient Market Hypothesis)
3. Allocational Efficiency: Resources go to most productive uses

In summary, operational efficiency specifically focuses on the cost and speed of executing transactions, making Option A the correct answer.