Exam 10: The Economics of Contracts

The matrix given below represents the payoffs to oil well owners Mike and Frasel if they enter into a unitization contract.Each of the owners know the exact amount of oil in the pool and the market price of oil. -Refer to Table .Under expectation damages, Mike's breach would entitle Frasel to:

Which of the following will be an efficient payment scheme for a defendant's attorney, who is experienced in handling similar cases in the past?

A travel agency enters into a contract with a hotel chain which gives it priority access to 25 percent of its rooms in major tourist destinations throughout the year.The contract encourages the hotel chain to increase the number of rooms in each of these hotels.The investment made by the hotel chain corresponds to which of the following aspects of specificity?

What are specific assets?

According to the Coase theorem, if transactions and negotiations are costless:

Escalators present in a contract must state:

Provisions that allow the contract price of a commodity to change with changes in its market price are referred to as:

_____ is an arrangement between an attorney and the plaintiff, in which the latter agrees to pay a certain fraction of the money he/she wins to the former.

Suppose Jerry and Joseph are two tenants sharing an apartment having a private lawn.They have agreed to share the costs of cleaning and maintaining it.Jerry would be considered an opportunist if he plants some flowers in this lawn at his own expense without consulting Joseph.

Suppose Jonah and Carlos have a contract, which Carlos chooses to breach. Jonah sues, and a court orders Carlos to pay him the amount he expected to gain at the time they made the contract, net of any amount he actually did receive after the breach.The form of payment which the court specifies in this example is called:

An automobile manufacturer imported equipment in order to produce a particular model at low cost.Falling demand, however, forced it to cease producing that model, and the company took a large loss because the equipment was not usable for producing other models.The equipment was characterized by:

_____ is an example of human specificity which raises the risks associated with opportunism.

When are liquidated damages required? Describe with an example.

Mention the different aspects of specificity of an asset.

Which of the following is a legal remedy for a breach of the contract between parties?

When should parties be allowed to breach a contract?

Which of the following contracts is considered self-enforcing?

A packaged fruit juice manufacturer contracts with several farmers to buy their orchards to support a new production facility.However, a particular orchard owner later refuses to sell his farm at the price in their contract.In such a case the court will order a liquidated damage.

Which of the following may require the parties to renegotiate certain parts of a contract if market conditions change drastically?

The matrix given below represents the payoffs to producer Hansel and purchaser Gretel from a transaction.Hansel is the producer of Good X and Gretel is the purchaser.Assume that Gretel has no incentive to break the contract. -Refer to Table .What would be the total economic value of the transaction if both of them keep the contract?