Which of the Following Is True If There Is No

question 19

Multiple Choice

Which of the following is true if there is no agreement between a principal and an agent regarding the amount for which the principal will compensate the agent?

• A) It will be assumed that the agent agreed to work for free on a gratuitous basis.
• B) The agent will be allowed to set the price which will be enforced unless it is unconscionable.
• C) The principal will be allowed to set the price which will be enforced unless it is unconscionable.
• D) The court will appoint a magistrate to set the price.
• E) Compensation will be calculated according to the customary fee in the situation.

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Definitions:

Property Rights

Legal rights to use, control, and benefit from a resource.

Free-Rider Problem

A situation where individuals consume a public good without contributing to its cost, leading to underprovision or overuse.

Coase Theorem

A principle that asserts that if property rights are clearly defined and transaction costs are low, private negotiations will lead to the efficient resolution of disputes regardless of initial distribution of rights.

Property Rights

Legal rights that determine the ownership and use of resources such as land, buildings, and intellectual property.