What type of cost involved when employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem
A)an opportunity cost
B)an implicit cost
C)a sunk cost
D)a transaction cost

Question

Quizplus · Accepted Answer

Transaction costs are the costs incurred during various stages of a transaction, including searching, bargaining, and enforcing a contract. In this case, employing a lawyer to draft and enforce a private contract between parties will involve transaction costs. These costs include fees paid to the lawyer, the time and resources spent in negotiating and drafting the contract, and legal fees for enforcing the contract if there is a breach. Therefore, D is the correct answer.

What Type of Cost Involved When Employing a Lawyer to Draft