Compared to a situation where transaction costs are zero, the existence of transaction costs
A) will reduce the volume of trade.
B) will reduce the gains from trade.
C) may lead some buyers and sellers to employ middlemen.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

Transaction costs can hinder trade by making it more expensive or difficult, thus reducing the volume and gains from trade. Middlemen can help reduce these costs, so all options are correct.

Compared to a Situation Where Transaction Costs Are Zero, the Existence