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Burgess Corp

question 23

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Burgess Corp.manufactures a line of heavy construction equipment.The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems.These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces.Which of the following types of alliance is this?


Definitions:

Socially Optimal

A state in which resources are allocated in the most efficient way from a societal perspective, maximising collective welfare or benefit.

Pigovian Tax

A tax or charge levied on the production of a product that generates negative externalities. If set correctly, the tax will precisely offset the overallocation (overproduction) generated by the negative externality.

Clean Up

The process of removing contaminants, waste, or undesirable items from an area, thus restoring it to its original or acceptable condition.

Moral Hazard

The situation where one party takes on risk because they know that another party will bear the consequences.

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