An informal understanding about the quality of product components supplied is a key to the relationship between most companies and their suppliers.This is a good example of:
A)an implicit contract.
B)an explicit contract.
C)a principal-agent conflict resolution.
D)an adverse selection problem.

Question

Quizplus · Accepted Answer

The given scenario describes an understanding between two parties without any form of written agreement, which is an example of an implicit contract. A principal-agent conflict resolution describes a scenario where a principal hires an agent to act on their behalf, but their interests may not always align. An adverse selection problem occurs when there is an information asymmetry between the buyer and seller, which causes the buyer to make incorrect and unfavorable decisions. Hence, option A is the best choice.

An Informal Understanding About the Quality of Product Components Supplied