When transaction costs are positive:
A)property rights are absent.
B)the marginal value of rights is equal to their marginal costs in equilibrium.
C)property rights are fully defined.
D)the marginal value of rights is larger than to their marginal costs in equilibrium.

Question

Quizplus · Accepted Answer

When transaction costs are positive, it implies that there are costs associated with making an exchange or enforcing property rights. In equilibrium, the marginal value of these rights (the additional benefit from having one more unit of the right) is equal to their marginal costs (the additional cost of enforcing or obtaining that unit of right), ensuring an efficient allocation of resources.

When Transaction Costs Are Positive