Question

QUESTION 1

1. When is it better to use a plan rather than a Coase market?

   	A.	Transaction costs are low
   	B.	Transaction costs are high

QUESTION 2

1. When is opportunistic behavior by agents more likely to occur in hierarchies?

   	A.	Transaction costs associated with policing behavior are low
   	B.	Transaction costs associated with policing behavior are high
   	C.	Transaction costs do not have an impact on opportunistic behavior

QUESTION 3

1. Which form of market imperfection leads to bounded rationality for decision makers?

   	A.	Incompletely defined property rights
   	B.	Imperfect information
   	C.	Imperfect competition
   	D.	Transaction costs

QUESTION 4

1. Please refer to the planned economy outcome (right panel) in Figure 2.5. How could we describe this outcome from the perspective of a market economy?

   	A.	There is no excess supply or excess demand at price P*
   	B.	There is an excess demand at price P*
   	C.	There is an excess supply at price P*
   	D.	The market is in equilibrium at price P*

QUESTION 5

1. Which of the following is NOT a basic category of property rights?

   	A.	Right to leverage property
   	B.	Right to collect income from property
   	C.	Right to use property
   	D.	Right to dispose of property

Answer 1

Question 1

Answer : Option A - Transaction costs are low.

Rather than Coarse market, it is better to use plan when transaction cost are low. Transaction costs can be defined as the cost incurred or expenses made to buy or sell goods and services. The labor needed to bring the goods and services to market can be represented as transaction cost. To investors transaction costs are very important because as transaction cost increases it will reduce or diminish the returns from assets. Thus it is better to plan when the transaction costs are low.