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Suppose a new contracting environment that requires greater specialized investments is considered. This new contract will result in a. an increase in the marginal benefit and a shorter optimal contract. b. a decrease in the marginal benefit and a longer optimal contract. c. an increase in the marginal benefit and a longer optimal contract. d. a decrease in the marginal benefit and a shorter optimal contract. 

          Suppose a new contracting environment that requires greater specialized investments is
considered. This new contract will result in
a. an increase in the marginal benefit and a shorter optimal contract.
b. a decrease in the marginal benefit and a longer optimal contract.
c. an increase in the marginal benefit and a longer optimal contract.
d. a decrease in the marginal benefit and a shorter optimal contract.
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Suppose a new contracting environment that requires greater specialized investments is considered. This new contract will result in a. an increase in the marginal benefit and a shorter optimal contract. b. a decrease in the marginal benefit and a longer optimal contract. c. an increase in the marginal benefit and a longer optimal contract. d. a decrease in the marginal benefit and a shorter optimal contract.

Added by Sebastian N.

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Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
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Suppose a new contracting environment that requires greater specialized investments is considered. This new contract will result in a. an increase in the marginal benefit and a shorter optimal contract. b. a decrease in the marginal benefit and a longer optimal contract. c. an increase in the marginal benefit and a longer optimal contract. d. a decrease in the marginal benefit and a shorter optimal contract. Suppose a new contracting environment that requires greater specialized investments is considered.This new contract will result in O a.an increase in the marginal benefit and a shorter optimal contract O b.a decrease in the marginal benefit and a longer optimal contract. O c.an increase in the marginal benefit and a longer optimal contract. O d.a decrease in the marginal benefit and a shorter optimal contract.
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Transcript

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00:01 So here we are asked about marginal cost, right? and our proposition is something like this.
00:05 We have the number of hours invested and we have marginal cost.
00:09 And we're arguing that marginal cost looks like this, that the marginal cost is increasing with more hours, right? why is that true? the first one is that firms charge more.
00:23 Well, this can't be right, right? there's no firms involved here, right? no firms involved.
00:27 You know, imagine you go out and you play by yourself or you play with your friends.
00:32 There's no firms here.
00:34 If it's increasing because firms charge more, we need to have firms in the stories.
00:39 B, each hour is equal to less marginal benefit.
00:52 This is right, right? i write, but this explains marginal benefit, not marginal.
00:59 Cost, right? we need a story about marginal cost, so this can't be it either, right? marginal benefit, this is talking about diminishing marginal benefit, not increasing marginal costs.
01:13 C, and c is the right answer...
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