Some Lawyers Accept Fees on a Contingency Basis Rather Than

question 18

Multiple Choice

Some lawyers accept fees on a contingency basis rather than the conventional hourly rate. Under the contingency fee, the lawyer receives a share of the client's winnings in court. Which concept of asymmetric information does this illustrate?

• A) Screening.
• B) Signaling.
• C) Contingent contract.
• D) a and b.
• E) b and c.

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Definitions:

Extraordinary Item

An unusual and infrequent gain or loss that is reported separately in a company's financial statements to give a clearer picture of its regular income.

Operating Assets

Assets that are used by a business in its daily or regular operations to generate revenue, including cash, inventory, and property, plant, and equipment.

Nonmonetary Asset

Assets that are not convertible directly into a fixed amount of money and do not have a stated monetary value, such as property, equipment, and intellectual property.

Fair Value

The projected cost at which an asset or liability could be swapped between consenting, informed entities in a transaction without any special ties.