Employing a Lawyer to Draft and Enforce a Private Contract

question 204

Multiple Choice

Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of

• A)an opportunity cost.
• B)an implicit cost.
• C)a sunk cost.
• D)a transaction cost.

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Definitions:

Profit-Maximizing Price

The price at which a firm can maximize its profit, determined by the intersection of marginal cost and marginal revenue.

Monopolistically Competitive

A market structure characterized by many firms selling products that are similar but not identical, allowing for some degree of market power and branding differentiation.

Economic Profits

The gap between a company's overall income and its combined outgoings, factoring in both direct and indirect expenses.

Entry Blocked

A market condition where barriers exist that prevent new competitors from easily entering an industry or area of business.