Suppose the Principal Offers to Share a Percentage of the Profit

question 85

Multiple Choice

Suppose the principal offers to share a percentage of the profit with the agent.Such a contract

• A) will yield the same income for the agent as a hire contract would.
• B) is incentive compatible.
• C) creates a production inefficiency.
• D) would not be acceptable to any agent.

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Definitions:

Minor

A minor is a person who is under the legal age of majority, typically under 18 years old in many jurisdictions, and is restricted from certain legal rights and responsibilities.

Legally Bound

Obligated by law to act in accordance with an agreement.

Restraints Of Trade

Legal limitations placed on business practices and agreements that might unfairly limit competition or control prices.

Free Competition

An economic situation in which businesses operate without undue restrictions, allowing for the natural forces of supply and demand to determine prices and output.