If transactions costs can be reduced in a marketplace, then total producer and consumer surplus will:
A) increase.
B) stay the same.
C) decrease.
D) first increase and then decrease.

Question

Quizplus · Accepted Answer

If transaction costs are reduced in a marketplace, it becomes easier and less costly for buyers and sellers to exchange goods and services, leading to an increase in market efficiency. As a result, more goods and services are exchanged at a lower cost, leading to an increase in total consumer and producer surplus. Therefore, reducing transaction costs will lead to an increase in total consumer and producer surplus.

If Transactions Costs Can Be Reduced in a Marketplace, Then