How has the internet dramatically reduced search costs in economic transactions?

• A. By raising the cost of communication between buyers and sellers
• B. By making information about products and prices more easily accessible to consumers
• C. By limiting consumer access to market information
• D. By increasing the number of intermediaries required for transactions

Answer: (B)

Verified step by step guidance

1. Understand the concept of search costs: these are the time, effort, and resources that consumers and producers spend to find information about products, prices, and sellers before making a transaction.
2. Recognize that the internet provides a platform where vast amounts of information about products and prices are aggregated and easily accessible to consumers, reducing the need for extensive individual searching.
3. Analyze how easier access to information lowers the barriers for consumers to compare different sellers and products quickly, which effectively reduces search costs.
4. Contrast this with the incorrect options: raising communication costs, limiting access to information, or increasing intermediaries would all increase search costs rather than reduce them.
5. Conclude that the internet's role in making product and price information more accessible is the key factor in dramatically reducing search costs in economic transactions.