An important reason why economies at an early stage of development tend to operate inefficiently is

A. they tend to be plagued by superstitious beliefs that stifle innovation.

B. they tend to have authoritarian governments that stifle innovation.

C. the high transactions costs associated with barter.

D. they tend to be dominated by the agricultural sector, where productivity is usually low

Question

Business

Kate White

9 September, 08:46

An important reason why economies at an early stage of development tend to operate inefficiently is

A. they tend to be plagued by superstitious beliefs that stifle innovation.

B. they tend to have authoritarian governments that stifle innovation.

C. the high transactions costs associated with barter.

D. they tend to be dominated by the agricultural sector, where productivity is usually low

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Answers (1)

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Pooch · Answer 1

The correct answer is option C.

Explanation:

At the early stages of development, the economies were not using the currency for the exchange of goods and services. Barter system existed in the early stages of development. In this system, goods were used as a medium of exchange to get other goods and services.

This system had a number of drawbacks. Double of coincidence was necessary for transactions to take place. High cost was associated with transactions. This led to inefficiency in the economy.