Question

The value of the Japanese yen has fluctuated widely during the 2000s compared to the U.S. dollar. A firm considering direct foreign investment would report this finding under the heading of__________

Answer 1

Answer:

The correct answer is transaction costs.

Explanation:

Transaction costs refer to the costs incurred in order to carry out a market transaction.

The concept of transaction costs was first developed by Nobel Prize Ronald Coase who wondered why companies exist. According to Coase, transaction costs are the costs associated with using the market price mechanism and companies are created in order to reduce those costs.

Specifically, in Coase terminology, transaction costs would be the costs associated with the use and calculation of the market price mechanism, or in other words, the costs that companies incur when, instead If they use their own internal resources, they go to the market to find those products and services.