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

Question

Quizplus · Accepted Answer

A contract specifies the terms of exchange between parties, particularly important when parties are strangers to each other. It helps to reduce uncertainty and increases the probability of mutually beneficial trade. Contracts do not necessarily increase profitability of inventions, provide reliable information about the firm's performance nor increase the risk faced by entrepreneurs.

A Contract