Which of the following correctly describes a transaction cost?
A) A transaction cost is the cost associated with organizing the transaction of goods or services.
B) A transaction cost is the rent paid to capital used in production.
C) A transaction cost is the wage paid to labour, a factor of production.
D) A transaction cost of an activity is the cost of the next best alternative that was given up.

Question

Quizplus · Accepted Answer

Transaction costs are the expenses incurred when buying or selling goods and services, which include the costs of searching for information, bargaining, making decisions, and enforcing contracts, not the costs directly associated with production inputs like capital or labor, nor the opportunity cost of choosing one alternative over another.

Which of the Following Correctly Describes a Transaction Cost