Spot Markets Are an Efficient Way for the Firm to Purchase

question 150

Multiple Choice

Spot markets are an efficient way for the firm to purchase inputs if:

• A) opportunism is not a problem.
• B) suppliers engage in hold-up.
• C) profit sharing is used to compensate managers.
• D) the supplier needs specialized investment to produce the input.

---

Definitions:

Incentive

Something that motivates or encourages an individual or entity to act in a certain way.

Costs And Benefits

This is an analysis approach that compares the potential outcomes and implications, in terms of costs and benefits, of an action or decision.

Marginal Social Benefit

The extra advantage to society that comes from using an additional unit of a product or service.

Marginal Social Cost

The total cost to society of producing one additional unit of a good, including both private costs and externalities.