A contract:
A) increases the profitability of inventions encouraging firms to develop new products.
B) provides the public with reliable information about the performance of a firm.
C) increases the risk faced by entrepreneurs.
D) specifies the term of exchange, facilitating exchange between strangers.

Question

Quizplus · Accepted Answer

A contract specifies the term of exchange, which helps strangers to transact with each other with trust and confidence. This reduces the risk faced by entrepreneurs and enables them to engage in market transactions with strangers. Contracts do not necessarily increase the profitability of inventions or provide the public with reliable information about the performance of a firm.

A Contract