Which of the following is most likely to be a feature of a state-contingent contract?
A) The agent pays the principal a higher licensing fee when demand is high compared to when demand is low.
B) The agent makes the same wage regardless of demand.
C) The agent, who lives in Nevada, earns more money on out-of-state sales (e.g., sales to California or New York) than in-state sales.
D) The restaurant owner (principal) pays the waiter (agent) more when it is snowing or raining outside.
A
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According to the budget line in the above figure, which of the following combinations is unaffordable?
A) 1 pizza and 3 CDs B) 3 pizzas and 2 CDs C) 2 pizzas and 4 CDs D) All of the above are affordable.
The marginal rate of substitution
A) is minus the slope of the indifference curve. B) can be computed by measuring the curvature of the indifference curve. C) cannot be deduced from the properties of the indifference curve. D) can only be computed if we know the prices of all goods.
Banca Solida has, in the past, always operated with a reserve ratio of 25 per cent. It has now been taken over by Gung-Ho Bank which operates with a reserve ratio of 12 per cent. Assuming that Banca Solida adopts the business practices of its new owner, what will be the effect on money supply in the country in which Banca Solida operates?
a. Money supply will increase because Banca Solida will increase its loans. b. The effect on money supply cannot be determined from the information given. c. Money supply will decrease because the loans will have to be repaid. d. Money supply will be unchanged because the central bank has made no policy changes.
A risk premium is
A. lower the more risky the future stream of profits. B. an additional compensation paid to the workers of a business enterprise. C. subtracted from the discount rate when calculating the present value of a future stream of profits. D. a measure calculated to reflect the riskiness of future profits.