Markets are usually preferred by economists for efficient transactions. However, Ronald Coase noted that administrative solutions may be superior because market transactions are:
A) never at the equilibrium price.
B) not costless.
C) always result in a price that clears the market.
D) hindered by technological change.

Question

Quizplus · Accepted Answer

While markets are generally efficient for transactions, they are not costless. Transaction costs can arise from information asymmetry, search and bargaining costs, and enforcement costs. This can make administrative solutions, such as contracts between firms, superior in some cases where these costs can be minimized. Ronald Coase argued that in some cases, administrative solutions can even be more efficient than market solutions.

Markets Are Usually Preferred by Economists for Efficient Transactions