In a market characterized by a single seller and many buyers, a seller's investment to reduce transaction costs can lead to which of the following situations?
A)It can reduce producer surplus in the long run.
B)It can raise the price paid by customers and still make them better off.
C)It can decrease the brand value of the product.
D)It can lower the quality of the product in the long run.

Question

Quizplus · Accepted Answer

In a single seller market, the seller has considerable market power and can raise the price. However, if the seller invests in reducing transaction costs, it can attract more buyers, leading to an increase in demand for the product. As a result, the seller can increase the price paid by customers to cover the costs of the investment, while still making customers better off by providing them with a more efficient transaction process. This can lead to an increase in both consumer and producer surplus in the long run.

In a Market Characterized by a Single Seller and Many