Suppose a New Contracting Environment That Requires Clearing Fewer Legal

question 105

Multiple Choice

Suppose a new contracting environment that requires clearing fewer legal hurdles is considered.This new contract will result in:

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

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Definitions:

Explicit Costs

Direct, out-of-pocket payments for expenses such as wages, rent, and materials, which are easily quantifiable.

Accountants

Professionals who manage financial records, conduct audits, and ensure tax compliance, playing a pivotal role in financial planning and analysis.

Accounting Profit

The difference between total monetary revenue and total monetary costs, and is calculated by subtracting explicit costs from total revenue.

Interest Rate

The percentage of a loan amount charged to the borrower or paid to an investor, serving as the cost of borrowing or the return on investment.