The internet is reshaping traditional economic arrangements by:

• A. eliminating the need for government intervention in all markets
• B. making all goods and services non-rival and non-excludable
• C. reducing transaction costs and enabling new forms of market exchange
• D. ensuring perfect competition in every industry

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of transaction costs in economics. Transaction costs are the costs associated with making an economic exchange, such as searching for information, bargaining, and enforcing contracts.
2. Step 2: Recognize how the internet affects transaction costs. The internet reduces these costs by making information more accessible, simplifying communication, and facilitating faster and cheaper exchanges.
3. Step 3: Analyze the impact of reduced transaction costs on market exchanges. Lower transaction costs enable new forms of market exchange, such as online marketplaces, peer-to-peer platforms, and digital services.
4. Step 4: Evaluate the incorrect options: the internet does not eliminate the need for government intervention in all markets, nor does it make all goods non-rival and non-excludable, and it does not ensure perfect competition in every industry.
5. Step 5: Conclude that the correct effect of the internet on traditional economic arrangements is its role in reducing transaction costs and enabling new forms of market exchange.