Answer the following statement(s) true (T) or false (F)
1. In the principal-agent problem, assigning full liability to the agent gives no incentive for the principal to avoid damages.
2. Transaction costs arise when property rights are nonexistent.
3. If all parties can enter into negotiations, social optimum is achieved with or without a Pigou tax.
4. A free-rider problem occurs when people can share in the benefits of an activity without being forced to contribute to its costs.
5. Court decision involving torts are irrelevant to social welfare.
1. False
2. True
3. True
4. True
5. False
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Explain how the gold standard operated
What will be an ideal response?
What most accurately describes the trend in inter-city prices between 1815-1860?
a. Prices of goods in different eastern cities diverged. b. The prices of goods in the Midwest converged towards the prices of goods in the east. c. Prices of goods in the Midwest decreased relative to the prices of goods in the east.
Whenever there is a shortage at a particular price, the quantity sold at that price will equal: a. the quantity demanded at that price
b. the quantity supplied minus the quantity demanded. c. the quantity supplied at that price. d. (quantity demanded plus quantity supplied)/2.
Taking out a mortgage to buy a condo, buying a mutual fund, and building a new factory are all examples of investment
a. True b. False Indicate whether the statement is true or false