When a Purchasing Manager Knows Roughly What Is Needed but Can't

question 34

Multiple Choice

When a purchasing manager knows roughly what is needed but can't describe it exactly-or when the purchasing arrangement may change as the job progresses-then buying is likely to be by:

• A) negotiated contract.
• B) description.
• C) inspection.

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Definitions:

Pre-contractual Problem

Issues that arise before a contract is finalized, often related to information asymmetry or negotiating terms.

Post-contractual Problem

Issues or disputes that arise after a contract has been signed and during its execution period.

Agency Costs

Costs incurred in principal–agent relationships; these costs are associated with moral hazard and adverse selection problems.

Adverse Selection

A situation in economics and insurance where the party on one side of the deal has more information than the party on the other side, leading to an imbalance and potentially unfair outcomes.