Even if there are social costs involved in a transaction, costs not reflected in the price agreed to by the parties to the transaction, the fact that the price is freely agreed to means that it must still be accepted as fair and beneficial.

Question

Quizplus · Accepted Answer

The presence of social costs (externalities) not accounted for in the transaction price can lead to market failure, where the price does not reflect the true cost to society, thus the transaction may not be fair or beneficial to all affected parties.

Even If There Are Social Costs Involved in a Transaction