Practice question · Select all that apply
Which of the following are transaction costs of using the market?
Hints
- These are the costs of arranging an exchange, not of the exchange itself.
- Ask which item you would still pay even if the deal were free to organise.
Show the answer
- B. Lawyer fees for drafting the supply contract
- C. Monitoring whether the contract is honored
- D. Time spent searching for a reliable supplier
Why
Transaction costs are the costs of arranging exchange, search, negotiation, enforcement. The price of the goods is the exchange itself, not a cost of organizing it.
Practise Concept of the Firm
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