A(n)_____ Is a Type of Contract by Which a New

question 36

Multiple Choice

A(n) _____ is a type of contract by which a new party agrees to perform a duty that one of the original parties to a contract was already legally obligated to perform.

• A) exculpatory agreement
• B) subcontract
• C) unilateral contract
• D) option contract

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Definitions:

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another.

Lemons

In economics, refers to a lower-quality product that is difficult to distinguish from higher-quality products before purchase, notably used in a market context where there is information asymmetry between buyers and sellers.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to participate in a market, leading to an imbalance in the market.

Durability

The quality of being able to withstand wear, pressure, or damage; the ability of a product to last for a long time.