Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality?
A) costs incurred due to lawyers' fees
B) costs incurred to reduce the pollution
C) costs incurred to enforce the agreement
D) costs incurred due to a large number of parties affected by the externality
E) All of these answers are considered transaction costs.

Question

Quizplus · Accepted Answer

The costs incurred to reduce the pollution are not considered transaction costs, as they are the costs of actually addressing the externality itself. The other options are all transaction costs that may be incurred in creating and enforcing a contract to address the externality.

Which of the Following Is Not Considered a Transaction Cost