It Is in the Interest of All Parties to Develop

question 3

Multiple Choice

It is in the interest of all parties to develop efficient solutions to agency problems through ______ so that more wealth can be shared among the contracting parties.

• A)adverse selection
• B)value maximization
• C)contracting until marginal benefit (MB)equals zero
• D)implicit contracts

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Definitions:

Conditional Contract

A contract that becomes enforceable only upon the occurrence of certain conditions or the performance of a particular act.

Implied Conditions

Terms and stipulations that, although not expressly stated, are understood to be part of a contract based on the nature of the transaction.

Complete Performance

Contract performance that occurs when all aspects of the parties’ duties under the contract are carried out perfectly.

Substantial Performance

Refers to a situation where a party has completed most of a contract's terms, fulfilling enough of the contract to warrant payment, though some minor elements may still be needed.