Transaction Costs Are Likely to Be Low When

question 30

Multiple Choice

Transaction costs are likely to be low when:

• A) a contract cannot be easily enforced.
• B) all aspects of a contract are fully speci?ed.
• C) monitoring performance is di?cult.
• D) the interpretation of a contract is vague.

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Definitions:

Fixed Costs

Costs that remain constant regardless of the amount of output or sales.

Variable Costs

Costs that change in proportion to the level of production or sales activity.

Direct Labor Budget

An estimation of the cost and amount of labor required for production or services, included within a company's overall budget planning.

Wage Rate

The amount of money paid to an employee per unit of time or per unit of output, which can be influenced by several factors including industry, occupation, and geographical location.