Which of the following investments can be classified as specific assets?
a. Opening a restaurant in the business district of a city.
b. Purchase of additional cotton bales expecting a rise in demand for cotton garments.
c. Leasing out land in a tourist spot to build a retail outlet.
d. Purchasing specialized equipment for a hydro-electric power project that will not produce electricity at a different location.
QUESTION 2Trade between countries is only based on absolute advantage.
Indicate whether the statement is true or false
QUESTION 3An oligopoly is a market:
a. dominated by a few buyers.
b. dominated by one buyer.
c. dominated by a few sellers.
d. with many sellers.
QUESTION 4Which of the following is true of opportunism?
a. Opportunism increases the possibility that a party can gain by disregarding the contract.
b. Opportunism lowers the cost of negotiation between parties when the contract is incomplete or unclear.
c. Opportunism allows parties to maximize the value of their transactions.
d. Opportunism leads to mutually beneficial outcomes.
QUESTION 5Clearly defined property rights promote the efficient use of property.
Indicate whether the statement is true or false
QUESTION 6When two ice cream vendors locate next to each other on the beach, they are exhibiting a Nash equilibrium.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 7An organization offers training programs for its employees at a subsidized rate to help them use a nascent technology that the organization is adopting. The trained employees later bargain for a higher wage from the management as their probability of finding better paying jobs increase because some other companies are also adopting it. This action of the employees is an example of:
a. selfishness.
b. holding up.
c. opportunism.
d. specificity.