The Hold-Up Problem Increases a fiRm's Transaction Costs Because _____

question 69

Multiple Choice

The hold-up problem increases a firm's transaction costs because _____.

• A) the scarcity of raw materials increases the costs of production
• B) labour unions hold-up production in order to bargain for higher wages
• C) the firm is dependent upon one buying relationship
• D) the assets involved in a hold-up problem are general in nature

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Definitions:

Saving

The portion of income not spent on consumption or taxes, typically put aside for future use or investment.

Potential GDP

Potential GDP refers to the maximum output an economy can produce without triggering inflation, if all resources are fully employed.

Full-employment GDP

Full-employment GDP is the maximum potential output an economy can produce when all resources, including labor, are fully utilized without causing inflation.

Capitalist Economy

A financial system where capital goods are owned by individuals or corporations, with investment choices, prices, production, and goods distribution primarily influenced by competition within a free market.