Explain how more than one possible state of nature affects contract choices
What will be an ideal response?
The uncertainty of the state of nature introduces the risk of random events. This forces principals and agents to incorporate efficiency of risk bearing into contracts.
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________ could result in a recession because it would ________
A) An increase in government expenditures on goods and services; shift the AD curve to the right. B) An increase in the quantity of money; shift the AS curve to the right. C) An increase in investment; shift the AD curve to the right. D) A tax cut; shift the AS curve to the left. E) A rise in the price of oil; shift the AS curve to the left.
If the monopoly illustrated in the figure above could engage in perfect price discrimination, then each buyer would pay
A) $2.00. B) $3.00. C) $3.50. D) a different price.