Question

As a condition for reopening their offices during a time of a high-contagious virus, dental practices are mandated to purchase heat sterilization machines for instrument cleaning after each patient. Assume that the physical dimensions of the sterilization machines allow them to only fit within dental rooms. This

Multiple Choice
a. decreases dental office transaction costs since specialized investments are lower
b. Increases dental office transaction costs since specialized investments are highet.
c. does not affect dental om ce transaction costs.
d. lowers dentat office sunk costs

Answer 1

The correct answer is that this (b) increases dental office transaction costs since specialized investments are higher.

Step-by-step explanation:

When dental practices are mandated to purchase heat sterilization machines for instrument cleaning, which can only be fitted within dental rooms, this represents a specialized investment made by the business to conform with health regulations.

These costs are associated with the purchase and operation of the required equipment, on top of regular business expenses. It is an example of a transaction cost that the dental offices would incur to comply with a regulation that aims to protect public health by ensuring a higher level of sterilization and thus reducing the risk of virus transmission.