Suppose a New Contracting Environment with an Economic Environment That

question 24

Multiple Choice

Suppose a new contracting environment with an economic environment that looks more uncertain 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.