A firm uses an efficiency wage scheme to deter workers from shirking. A risk-neutral worker will not shirk if
A) the expected loss from being fired is larger than or equal to the gain from shirking.
B) the expected loss from being fired is smaller than the gain from shirking.
C) the gain from shirking is positive.
D) the expected loss from being fired is zero.
A
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If all of the divisions in a vertically integrated firm are owned by the same company, why is it possible that asymmetric information problems can lead to inefficient outcomes in vertically integrated firms?
A) Divisions that produce parts for other divisions have effective monopoly power, so the outcome for these division must be inefficient. B) This outcome is no longer possible in the U.S. after passage of the Sarbanes-Oxley law. C) Vertically integrated firms are often subject to antitrust investigations, so managers routinely limit the amount of information that flows between divisions. D) Managers in some divisions may not have information about production capacities or costs in related divisions.
A multiplier of 10 means that a $100 billion increase in investment will
A. increase equilibrium real GDP by $100 billion. B. decrease equilibrium real GDP by $1000 billion. C. increase equilibrium real GDP by $10 billion. D. increase equilibrium real GDP by $1000 billion.