A group of business people are having coffee. Which of the following quotations describes transactions costs?
A)"The new production process we've installed uses less capital and labour than the old one."
B)"The new assembly line has higher capital costs, but the fall in workers' hours has lowered overall costs."
C)"The costs of per-unit production have fallen dramatically as we have increased the length of the production runs."
D)"Despite the higher costs of negotiating the contracts, hiring the cleaning firm is much cheaper than using our own staff."
E)"The computer servicing people we have hired work very well as an integrated problem-solving group."

Question

Quizplus · Accepted Answer

Transactions costs refer to the expenses incurred in making market transactions. Choice D talks about the higher costs of negotiating contracts, which is one of the examples of transaction costs.

A Group of Business People Are Having Coffee