Which of the Following Is True with Regard to the Difference

question 21

Multiple Choice

Which of the following is true with regard to the difference in exchange costs between an item produced internally firm and an item purchased from an outside supplier through an arm's length market transaction as the level of asset specificity increases?

• A)The cost difference is positive for both low and high levels of specificity
• B)The cost difference is negative for both low and high levels of specificity
• C)The cost difference is negative for low and positive for high levels of specificity
• D)The cost difference is positive for low and negative for high levels of specificity
• E)As asset specificity increases,the transaction costs of the market exchange decrease

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Definitions:

Enforceable

Capable of being imposed or upheld by legal process or action.

Lifetime Employment

A job guarantee in which an employee can expect to remain employed in their position for their entire working life.

Oral Contract

An agreement between parties that is spoken and not written, yet is legally binding unless specifically required by law to be written.

Enforceable

Capable of being executed or imposed in accordance with legal or contractual requirements.