A Contract Containing an Adjustment Provision Which Allows the Supplier

Multiple Choice

A contract containing an adjustment provision which allows the supplier to recover a fraction of his additional costs when input prices cross a certain level, is considered efficient because:

A) it reallocates the supplier's risk while checking his activities.
B) it reallocates risks completely to the buyers.
C) it allows the supplier to take up risks.
D) it allows the buyers to partially reallocate their risks.