Answer: the costs of arranging trades are low.

## 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.

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