In order for a voluntary agreement to be reached in general, transaction costs should be
A. determined by the Environmental Protection Agency.
B. low relative to expected marginal benefits of the agreement.
C. infinite.
D. high relative to expected marginal benefits of the agreement.
Answer: B
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If bad credit risks are the ones who most actively seek loans then financial intermediaries face the problem of
A) moral hazard. B) adverse selection. C) free-riding. D) costly state verification.
If identical firms sell an undifferentiated product, advertising is likely to be
A) used to attack the rivals' products. B) collectively undertaken by the industry group. C) strategically aimed at deterring entry. D) focused on secret ingredients.
Added expenditures in the circular flow that are not paid for out of domestic resource income are known as
a. leakages. b. injections. c. imports. d. infusions.
Mr. Frank, a foreman supervisor some 43 employees, was asked by his secretary to sign a form requesting additional supplies needed on the factory floor. He was not careless when he examined the form, but his secretary had cleverly arranged the signature line so that instead of signing a request form for supplies he signed a cheque payable to his secretary. What plea, if any, would be used to defend against her action on the cheque?
a. Mistake b. Illegality of object c. Rescission d. Non est factum e. Rectification