Duke is a highly skilled negotiator who could work for many law firms. The law firm that hires Duke is able to collect twice as much revenue per hour of Duke's time than it can for any other negotiator in town. The increased revenue will:
A. all go to Duke because, if it didn't, another firm could hire Duke away.
B. be split between Duke and the law firm, but how it will be split cannot be determined without more information.
C. all go to the law firm because the firm bears the risk of running the business.
D. be evenly split between Duke and the law firm to maximize surplus.
Answer: A
You might also like to view...
GDP is a measure of:
A. domestic production. B. changes in the general level of prices. C. material well-being. D. social welfare.
When relationship-specific exchange occurs in complex contractual environments, the best way to purchase inputs is through:
A. short-term agency agreements. B. spot markets. C. vertical integration. D. long-term contracts.
The difference between exports and imports of goods is the
A) balance of trade. B) balance of payments. C) balance of accounts. D) balance of paying.
When set correctly, a Pigouvian tax is efficient because it is equivalent to a lump sum tax.
Answer the following statement true (T) or false (F)