Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality ?

A. costs incurred due to lawyers’ fees
B. costs incurred to reduce the pollution
C. costs incurred to enforce the agreement
D. costs incurred due to a large number of parties affected by the externality
E. All of these answers are considered transaction costs

Correct Answer: costs incurred to reduce the pollution ✔

Last Updated: June 11, 2019