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Author Question: The best contract a principal can make with an agent gives the agent all profit after paying the ... (Read 96 times)

abern

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on: Jul 1, 2018
The best contract a principal can make with an agent gives the agent all profit after paying the principal a fixed fee.
 
  Indicate whether the statement is true or false

Question 2

Contracts can avoid transaction costs.
 
  Indicate whether the statement is true or false


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Pswine

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

F This contract is good for motivating the agent but it also forces the agent to bear risk, something the agent may not wish to do.

Answer to Question 2

F Contracts lead to transaction costs because every possible eventuality cannot be anticipated by parties to the contract and protected against.


abern

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Reply 2 on: Jul 1, 2018
YES! Correct, THANKS for helping me on my review

lkanara2

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Reply 3 on: Yesterday
Excellent

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