The best contract a principal can make with an agent gives the ...

[abern]

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

[Pswine]

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]

Excellent

[Viet Thy]

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