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Consider a potential trading relationship between a consultant and a business client. The marginal cost of service for the consultant is given by MC =
Consider a potential trading relationship between a consultant and a business client. The marginal cost of service for the consultant is given by MC = 2q, where q is the quantity of consulting services provided. The demand curve for the client is MB = 150 - q. Note, however, that it is difficult to ascertain how many units of consulting service are actually provided. To (partially) remedy this, the consulting firm can adopt a recording system at a cost of $100. Similarly, for $100 the client can implement an auditing system to try to verify the number of consulting services actually provided by the consulting firm. However, even if both firms implement the auditing and recording systems, only 30 units of consulting services will actually be traded. What is the total agency cost? Group of answer choices 800 200 3750 700 600
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