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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Use the figure below to answer the following question.
What area represents society's total surplus after the government imposes the excise tax on the market?
A. triangle $1c$9 plus triangle $21a$13 B. triangle abc C. square $13ac$9 plus triangle abc D. triangle $1c$9 plus triangle $21a$13 plus rectangle $13ac$9
To have a rising standard of living, a nation's stock of capital must
a. equal the amount of consumption in the country b. grow faster than the population c. be associated with a low rate of investment and high rate of consumption d. grow slower than the population e. decline to enable the production of essential consumption goods
The national defense argument for trade protectionism holds that
A) what is good for business is good for the country. B) what is good for consumers is good for the country. C) consumers' surplus rises by more than producers' surplus falls. D) producers' surplus rises by more than consumers' surplus falls. E) none of the above
Countries that adopt the most advanced technologies will have
A. stagnant labor productivity. B. highly productive labor and capital. C. decreasing profitability. D. constant returns to scale.