Multiple Choice Quiz

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.

1		The distinction between observable and verifiable information
			A)	has to do with specific decision rights.
			B)	concerns the fundamental transformation.
			C)	is that people are sometimes sloppy in verifying information.
			D)	has no bite in a complete contracting setting.
2		A governance structure
			A)	specifies the parties of an exchange.
			B)	gives the government in general too much power.
			C)	consists of the rules by which an exchange is administered.
			D)	structures the asymmetry of information.
3		There is only a role for a governance structure
			A)	in an incomplete contracting setting.
			B)	when the Coase theorem holds.
			C)	in situations in which information is verifiable.
			D)	when complete contracts are contingent.
4		An incomplete contract is completed by
			A)	assigning costs and benefits.
			B)	allocating decision rights.
			C)	a third party.
			D)	collecting additional information.
5		The ‘fundamental transformation’ concerns the change in
			A)	bargaining position.
			B)	decision rights.
			C)	bargaining strength.
			D)	income rights.
6		An incomplete contract enables investments in specific assets by
			A)	improving the bargaining position of the investor.
			B)	promoting transparency.
			C)	improving the income rights of the investor.
			D)	allocating bargaining power to the investor.
7		The efficient allocation of ownership rights depends on the
			A)	fundamental transformation.
			B)	residual decision rights.
			C)	relative importance of the specific investments of the various parties.
			D)	difference between complete and incomplete contracts.
8		An alternative to allocating decision rights is to grant
			A)	fringe benefits.
			B)	access.
			C)	complementary assets.
			D)	financial control.
9		The difference between hold-up and complexity explanations for the choice of governance structure is that the former
			A)	focuses on ex ante problems, while the latter highlights ex post problems.
			B)	highlights opportunistic behavior, while the latter focuses on bounded rationality.
			C)	highlights income rights, while the latter highlights decision rights.
			D)	highlights complete contracts, while the latter highlights incomplete contracts.
10		The allocation of ownership matters in an incomplete contracting setting, whereas it does not in the Coase theorem, because
			A)	income rights are taken into account.
			B)	the Coase theorem is outdated.
			C)	different assumptions are being used.
			D)	the Walrasian auctioneer is absent in the former.