Suppose a New Contracting Environment That Requires Less Specialized Investments

question 154

Multiple Choice

Suppose a new contracting environment that requires less specialized investments is considered.This new contract will result in:

• A) an increase in the marginal benefit and a longer optimal contract.
• B) an increase in the marginal benefit and a shorter optimal contract.
• C) a decrease in the marginal benefit and a longer optimal contract.
• D) a decrease in the marginal benefit and a shorter optimal contract.

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Definitions:

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