Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of
A)an opportunity cost.
B)an implicit cost.
C)a sunk cost.
D)a transaction cost.

Question

Quizplus · Accepted Answer

Employing a lawyer to draft and enforce a private contract involves expenses related to the process of making and enforcing agreements, which are known as transaction costs. These costs are incurred in the process of exchanging goods or services, including legal fees, negotiation costs, and enforcement costs.

Employing a Lawyer to Draft and Enforce a Private Contract