Author Question: One way to avoid holdups is to A) use contracts. B) vertically integrate. C) use multiple ... (Read 70 times)

K@ · **on:** Jul 1, 2018

One way to avoid holdups is to

A) use contracts.
B) vertically integrate.
C) use multiple sources.
D) All of the above.

Question 2

Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus.

Indicate whether the statement is true or false

1_Step_At_ATime · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

D

Answer to Question 2

False. One impact of a supply restriction is an exchange from consumers to producers. The net effect on social welfare is zero. Additionally, there is a deadweight loss. This is the additional surplus that could be generated if supply were not restricted. This effect is always negative. As a result, social welfare always declines in response to a supply restriction.