Question

A reduction in transaction costs will tend to

(A) reduce the number of mutually beneficial exchanges that occur.
(B) make specialization according to the law of comparative advantage more difficult.
(C) decrease the value created by exchanges in an economy.
(D) increase the number of mutually beneficial exchanges that occur.

Answer 1

increase the number of mutually beneficial exchanges that occur.

Step-by-step explanation:

When you reduce the transactions cost, the number of transactions increase, it means that every agent it’s benefit, because the buyer could afford more transactions and the seller could reduce the price of their products or services that are included in the purchase. Even the agent it's in charge of the transaction its benefit too, because the number of transactions increase due to the increase of the demand.