What is the term for the contract that maximizes the principal's payoff subject to the constraint that the principal lacks the agent's private information?
a. First best
b. Second best
c. Third best
d. Pareto optimum
b
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If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 110, and at the expiration date the price is 114, your ________ is ________
A) profit; $4000 B) loss; $4000 C) profit; $3000 D) loss; $3000
Assume the market in the graph shown was originally at an equilibrium with demand D and supply S. Suppose Demand shifts and becomes D2. What might have caused such a shift?
A. People expect the price of this good to drop in the near future. B. The good became more popular. C. The good became cheaper to produce. D. Substitutes for this good became less expensive.
As a result of an increase in the payroll tax that employers must pay on their employees? wages, employers reduce the starting wage for new employees. This is an example of
A. tax incidence. B. tax shifting. C. a regressive tax. D. tax avoidance.
Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $825 per robot. To maximize profits, Robbie's Robots should
A. make no adjustments as they are already maximizing their profits. B. increase their output. C. decrease their output. D. stop producing since it is earning a loss.