Question

Examples of transaction costs include ​(check all that​ apply):

a. the time required to negotiate an agreement.
b. the difference between the private costs and social costs of production.
c. the cost of drafting a contract or agreement.
d. the cost of the externality.
e. the cost of monitoring an agreement.

Answer 1

Transaction costs are resources used in making decisions, including time and effort. Examples include: a) time spent negotiating, c) costs of drafting contracts, and e) monitoring costs. These should not be confused with social or conformity costs, which are not considered transaction costs.

Step-by-step explanation:

Transaction costs are the use of resources, such as time and effort, necessary to make group decisions. These costs include a variety of actions related to the decision-making process. Examples of transaction costs include:

a. the time required to negotiate an agreement - This involves the time spent discussing terms, finding common ground, and coming to a mutual understanding.

c. the cost of drafting a contract or agreement - These are the actual monetary expenses involved in writing and formalizing the terms of an agreement.

e. the cost of monitoring an agreement - After an agreement is in place, resources must be allocated to ensure that all parties adhere to the terms.

These are distinct from social costs, which include both private and third-party costs such as environmental impacts; and conformity costs, which are the sacrifices individuals make when a group decision doesn't align with their personal preferences. b. the difference between the private costs and social costs of production and d. the cost of the externality related to social costs and externalities, not transaction costs.

Answer 2

Examples of transaction costs include ​(check all that​ apply):
a. the time required to negotiate an agreement.
b. the difference between the private costs and social costs of production.
c. the cost of drafting a contract or agreement.
d. the cost of the externality.
e. the cost of monitoring an agreement.

Transactions costs are costs that are associated with buying and selling a good or service. These are the costs that are accrued during the transaction prices. Though some of the costs can range/change depending on what is being sold, most transactions accrue the same costs which are normally based around making the agreements.