The higher the transaction cost of an exchange, the lower the probability of the exchange taking place between the buyer and the seller.

Question

Quizplus · Accepted Answer

This statement is true because higher transaction costs increase the cost of trade for both the buyer and the seller, making it less attractive to trade. As a result, the probability of exchange decreases. Conversely, lower transaction costs make it more efficient and attractive for buyers and sellers to trade, increasing the probability of exchange.

The Higher the Transaction Cost of an Exchange, the Lower