An increase in the marginal cost arising from a more complex specialized investment environment will cause the optimal contract length to

Question

Quizplus · Accepted Answer

An increase in marginal cost implies that the cost of production is increasing. When the cost of production increases, it becomes less efficient to produce goods or services in the short-term. Therefore, the optimal contract length will decrease to mitigate these inefficiencies.

An Increase in the Marginal Cost Arising from a More