Suppose transactions costs are created by a principal-agent problem. If the objective is economic efficiency, who should be made liable for damages resulting from the interaction of the principal and the agent?
a. The principal should be liable for all damages.
b. The agent should be liable for all damages.
c. Liability for damages should be equally split between the principal and the agent.
d. The assignment of liability is irrelevant according to the Coase Theorem.
b. The agent should be liable for all damages.
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Here is a consumption function: C = C0 + MPC(Yd). If consumption is $2,000, MPC =0.75, and disposable income is $2,000, what does autonomous consumption equal?
A) $950 B) $3,500 C) $500 D) $4,500 E) none of the above
If the liberum veto is used in a policy-making setting, it means:
A. it is easy to halt policies, because only one person needs to be bribed to stop them. B. that government is an easy target for an area to become corrupt or taken advantage of. C. complete consensus is needed for legislation to pass. D. All of these are true.