In a Market Characterized by Many Sellers, Assume That Transaction

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.

Correct Answer:

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