Which of the following is true of implicit contracts?
A. The opportunity cost of residual loss is low.
B. The gains from trade are low and there are market failures.
C. Enforcement depends on the private incentives of individuals.
D. Agents do not act in the best interest of principals.
Answer: C
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Current discussions about the financing of congressional campaigns and presidential elections focus on the problem of
a. internalities b. externalities c. public goods d. public choice e. representation
Production output has dropped at Leah’s Deli. Leah has made several changes at her deli recently. Which one is the most likely explanation for the production output decline?
a. An efficient, new meat slicer was installed. b. Online ads promoting sandwich specials were released. c. The dining room booths were updated. d. Kitchen staff was expanded to meet growing demand.