Which of the following is true of implicit contracts?
A)Enforcement depends on the private incentives of individuals.
B)Agents do not act in the best interest of principals.
C)The gains from trade are low and there are market failures.
D)The opportunity cost of residual loss is low.

Question

Quizplus · Accepted Answer

Implicit contracts are informal agreements between parties that are not legally binding. As such, enforcement of these contracts depends on the private incentives of individuals rather than the legal system. Parties may behave in a trustworthy manner or risk damaging their reputation and future opportunities, but ultimately there is no legal recourse to enforce the terms of the contract.

Which of the Following Is True of Implicit Contracts