If the costs of negotiating and enforcing contracts are _____ relative to the benefits, buyers and sellers have incentives to make economically efficient arrangements that _____ value.
A)high; increase
B)low; increase
C)high, decrease
D)low; decrease

Question

Quizplus · Accepted Answer

When the costs of negotiating and enforcing contracts are low relative to the benefits, buyers and sellers are more likely to engage in economically efficient arrangements that increase value. This is because the lower transaction costs make it easier and more profitable for buyers and sellers to enter into agreements that maximize their gains from trade.

If the Costs of Negotiating and Enforcing Contracts Are _____