Transaction costs of private contracts are higher:
A)when direct contact between economic actors is frequent.
B)when the number of actors involved is relatively small.
C)when the economic actors involved are more homogenous.
D)when large specific investments have been made.

Question

Quizplus · Accepted Answer

When large specific investments have been made, the transaction costs of private contracts will be higher. This is because when large investments are at stake, the parties involved will require more detailed and specific contracts which will involve a higher cost in terms of negotiating, drafting and enforcing the contracts.

Transaction Costs of Private Contracts Are Higher