One advantage of team production over contracting out is that
a. the cost of negotiating and enforcing contracts is generally lower with team production than with contracting out.
b. the principal agent problem is eliminated by team production but cannot be addressed in contracting out.
c. costs are always lower with team production because of the elimination of transactions costs.
d. efficiency is always greater with team production.
A
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If ranchers in Texas fear a sharp drop in cattle prices next year, they will probably
A) bring less cattle to market this year. B) bring more cattle to market this year. C) keep supply unchanged now and bring more cattle to market next year. D) keep supply unchanged now and bring less cattle to market next year. E) do none of the above.
Consider the linear downward-sloping demand curve and the concept of elasticity. Which of the following statements is true?
a. As quantity demanded increases, so does buyers' sensitivity to price. b. When the price elasticity of demand is 1, consumers are indifferent to price changes. c. The ratio of price to quantity demanded measures the price elasticity of demand. d. As the price of a good increases, the price elasticity of demand increases. e. When an individual buys more of a good, his or her price elasticity of demand for the good increases.
Suppose that a firm produces electricity by burning coal. The production process creates a negative externality of air pollution. If the firm does not internalize the cost of the externality, it will produce where
a. the value of electricity to consumers equals the private cost of producing electricity. b. the value of electricity to consumers equals the social cost of producing electricity. c. the cost of the externality is maximized. d. the transaction costs of private bargaining are minimized.
If the economy's output and income double in 35 years, we can:
A) not say anything about the average annual rate of growth. B)conclude that its average annual rate of growth is about 2 percent. C) conclude that its average annual rate of growth is about 4 percent. D) conclude that its average annual rate of growth is about 5.5 percent.