Which of the following is an example of an external transaction cost?
A) The cost of setting up a production unit
B) The cost of searching for a contract manufacturer
C) The cost of recruiting and retaining employees
D) The cost of maintaining plant and machinery

Question

Quizplus · Accepted Answer

When companies transact in the open market, they incur external transaction costs: the costs of searching for a firm or an individual with whom to contract, and then negotiating, monitoring, and enforcing the contract.

Which of the Following Is an Example of an External