Which are social costs associated with the inability of shareholders to observe an executive's effort? (You may choose more than one.)
a. Excessive insurance offered
b. The executive has to be exposed to risk to induce effort, and risk is costly.
c. The executive ends up exerting less than first-best effort.
d. Excessive effort induced.
b, c
Economics
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Suppose a plaintiff hires a lawyer to represent her in a court case. The lawyer will be paid a fixed fee. Under this contract,
A) production efficiency is achieved. B) the client bears all of the risk. C) the lawyer has an incentive to lie about his hours worked. D) All of the above.
Economics
Uncertainty includes all of the following except ____
a. unknown effects of deliberate actions b. incomplete information as to the type of competitor c. random disturbances d. unverifiable claims e. accidents due to weather hazards
Economics