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Author Question: With full information any contract will lead to production efficiency. Indicate whether the ... (Read 86 times)

silviawilliams41

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on: Jul 1, 2018
With full information any contract will lead to production efficiency.
 
  Indicate whether the statement is true or false

Question 2

In the presence of asymmetric information, production efficiency is assured when the principal and agent share the profit.
 
  Indicate whether the statement is true or false
Microeconomics ¦ Perloff ¦ 8th Edition
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Andromeda18

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Reply #1 on: Jul 1, 2018
Answer to Question 1

False. A hire or revenue sharing contract will not provide the incentives for the agent to maximize joint profit.

Answer to Question 2

False. Since the agent faces full marginal cost but receives only a fraction of the marginal benefit, joint profit is not achieved.


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