An agreement in which the incentives of both parties match their goals as closely as possible is:
A. a corporate takeover contract.
B. an incentive-compatible contract.
C. an X-inefficiency contract.
D. a public good.
Answer: B
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A monopoly coffee shop is deciding on a menu of different cup sizes to sell to a population of consumers, some of whom are high demanders and some low demanders. How would the optimal menu differ depending on whether the consumers can be observably separated into the different types or not?
a. The menu is unaffected by type observability. b. If types aren't observable, the large cup size should be increased to separate the high demander. c. If types aren't observable, the small cup size should be increased to make it more attractive to low demanders. d. If types aren't observable, the small cup size should be reduced to make it less attractive to high demanders.
Which of the following is a true statement?
a. Unanticipated inflation is a change in the general level of prices that catches most decision makers by surprise. b. High and variable rates of inflation are easy for decision makers to forecast accurately. c. High and variable rates of inflation can increase GDP by reducing investment. d. When decision-makers are able to anticipate slow, steady rates of inflation, prices become more unstable and there is a negative impact on the level of prosperity.
Asset price inflation can be a problem because it:
A. gives people the illusion that their real wealth has decreased more than it really has. B. gives people the illusion that their real wealth has increased more than it really has. C. typically increases at the same rate as goods price inflation. D. makes people switch their resources from risky investments to conservative investments.
Peanut butter and jelly are complements. A decrease in the price of one will result in
A. An increase in the quantity demanded of the other. B. A decrease in the quantity demanded of the other. C. An increase in the demand for the other. D. A decrease in the demand for the other.