A Major Drawback to Cost Plus Fixed Fee Contracts When

question 28

Multiple Choice

A major drawback to cost plus fixed fee contracts when compared to fixed fee contracts is _____.

• A)firms have an incentive to overbid
• B)the government must monitor the firm's costs
• C)the government has an incentive to award bids to the worst companies
• D)there is an adverse selection problem

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Definitions:

Self-control

Self-control is the ability to regulate one's emotions, thoughts, and behavior in the face of temptations and impulses.

Equity Theory

An assumption that how much people are willing to contribute to an organization depends on their assessment of the fairness, or equity, of the rewards they will receive in exchange.