In a market characterized by many sellers, assume that transaction costs for both buyers and sellers are both costlessly cut to zero. What will happen to total economic value?
a. Economic value will remain unchanged because the decrease in consumer surplus will offset the increase in producer surplus.
b. Economic value will remain unchanged because the decrease in producer surplus will offset the increase in consumer surplus.
c. Economic value will certainly increase but its magnitude will depend on the initial transaction costs of the market participants.
d. Economic value will certainly decrease but its magnitude will depend on the initial transaction costs of the market participants.
C
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Supply and demand analysis suggests that a sharp increase in the price of gasoline will cause the
a. price of fuel-efficient compact cars to decrease. b. supply of gasoline to decrease. c. demand for large luxury cars to increase. d. demand for fuel-efficient cars to increase.
Unlike a private good, a public good:
A. has no opportunity costs. B. has benefits available to all, including nonpayers. C. produces no positive or negative externalities. D. is characterized by rivalry and excludability.