Author Question: When is disclosure economically desirable?[br][br][b][color=red]Question 2[/color][/b][br][br]The ... (Read 38 times)

sabina · **on:** Jun 30, 2018

When is disclosure economically desirable?

Question 2

The scope of a firm refers to its
A) vertical boundaries.
B) economies of scale.
C) horizontal boundaries.
D) all of these choices.

djofnc · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A contract can contain information that is valuable to both the signing parties and outsiders. Sometimes the law requires that certain facts be disclosed in it. Disclosure is economically desirable where a failure to disclose would reduce the economic value the agreement can produce. As an example, if you put a house on the market you must generally inform potential buyers that it has structural defects or is infested by termites. A buyer with this information is in a better position to determine its suitability than one without it.

Answer to Question 2

C