Courts' Ability to Enforce Contracts May Create Incentives for Two

question 18

Multiple Choice

Courts' ability to enforce contracts may create incentives for two parties to uphold an agreement when they otherwise would have preferred to defect.By doing so,courts prevent the contracting parties from facing a/an _________________________.

• A) principal-agent problem
• B) coordination problem
• C) Prisoner's Dilemma
• D) unstable coalition
• E) collective-action problem

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Definitions:

Net Profits

The amount of income that remains after subtracting all expenses, taxes, and costs from total revenue.

Shareholders

Individuals or entities that own shares in a corporation, thereby having an interest in its performance and governance.

De Jure Corporation

A corporation whose existence is the result of incorporators having fully or substantially complied with the relevant corporation statutes.

Promoter

An individual or company responsible for the organization, financing, and marketing of an event or venture.