Elena works as a housekeeping staff member in a hotel. Her task is to clean the rooms that are unoccupied by guests. Because it is not possible for her boss to monitor her work regularly, she often skips cleaning some of the rooms
a) What is the term used to refer to such behavior? b) How can the management motivate workers like Elena to work harder?
a) The term used to refer to Elena's behavior is moral hazard. Moral hazard refers to actions that individuals take based on their own private information that is unavailable to the other party in the transaction but adversely affects their payoff. In this case, only Elena knows which rooms she has cleaned. This information is unavailable to her boss.
b) The management can motivate workers like Elena to work harder by giving efficiency wages. Efficiency wages are wages above the lowest pay that workers would accept that employers use to increase workers' motivation and productivity.
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A) maximizing. B) minimizing. C) sanitizing. D) satisfying.
An increase in demand and an increase in supply will lead to
A) unambiguous increases in both price and quantity. B) unambiguous decreases in both price and quantity. C) an unambiguous increase in quantity, but the effect on price is indeterminate. D) an unambiguous increase in price, but the effect on quantity is indeterminate.