Suppose an employer has monitoring devices established so that the probability of an employee being caught while shirking is 0.2. If the gain to the employee from shirking is $1,000, how large a bond will deter shirking?

What will be an ideal response?

B = 1000/0.2 = $5,000. With a $5,000 bond and a 20% chance of being caught, the employee's gain from shirking just equals the expected cost of shirking.

Economics

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The monetarist explanations of the Great Depression focus on

a. falls in the LM curve and aggregate demand. b. falls in aggregate supply. c. fall in the IS curve and aggregate demand.. d. falls in expectations and the expected price level.

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An increase in the stock of human capital would

a. shift the production function upward, lowering productivity and raising living standards b. shift the production function upward, raising productivity and living standards c. cause the economy to move along a fixed production function, increasing both productivity and living standards d. cause the economy to move along a fixed production function, reducing both productivity and living standards e. shift the production function downward, reducing both productivity and living standards

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