Even-handed enforcement of contracts fuels economic prosperity because it
A) increases market uncertainty and the probability of contract violations.
B) promotes gains from trade by keeping transaction costs low.
C) permits individuals to invade or infringe on the property rights of others.
D) increases transaction costs.
B) promotes gains from trade by keeping transaction costs low.
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If a country wants to keep the domestic currency undervalued against a foreign currency:
A) it will buy both the foreign and domestic currency. B) it will sell both the foreign and domestic currency. C) it will buy the domestic currency and sell the foreign currency. D) it will buy the foreign currency and sell the domestic currency.
Which statement is correct regarding allocative efficiency in monopolistic competition?
a. When new competitors enter a monopolistically competitive industry, the demand curve for each firm will shift to the left. b. When new competitors enter a monopolistically competitive industry, the demand curve for each firm will shift to the right. c. When new competitors exit a monopolistically competitive industry, the demand curve for each firm will shift to the left. d. When new competitors enter a monopolistically competitive industry, the demand curve for each firm will not be affected.
Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that:
A. the price of oats will remain at $2 per bushel in the long run. B. the oat industry is in equilibrium. C. firms in the oat industry will earn economic profits in both the long run and the short run. D. new firms will enter the oat industry.
Billy is considering the purchase of a rental house. The house costs $240,000 and it will generate annual revenues of $15,000 and annual expenses of $3,000. Nevertheless, Billy will need to borrow $240,000 at an interest rate of 7% per year in case he decides to make this investment. Should Billy purchase this house?
A) No, he will lose money. B) Yes, his profits will be zero. C) No, his profits will be positive but close to zero. D) Yes, he will profit from this investment.