A contingent contract can create production inefficiency; however, many principals accept this because
A) inefficiency is inevitable.
B) monitoring is costless.
C) risk is reduced.
D) profit will increase as a result.
C
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When there is a shortage of a product in a market the:
a. price will fall. b. price must be below the equilibrium price. c. price must be above the equilibrium price. d. producers will reduce output and sales will fall.
If Happy Feet chooses to No Ad, Best Nails should ________ and earn ________ million in net profit.
Happy Feet wants to prevent Best Nails from entering the nail salon market. The above game tree illustrates the different strategies and corresponding payoffs for the two firms. Both Happy Feet and Best Nails have the same strategies of advertising (Ad) or not advertising (No Ad). The payoffs represent net profit in millions.
A) Ad; $2 B) No Ad; $3 C) No Ad; $4 D) Ad; $3