Suppose employees pay a bond of $1,000 to an employer. The gain from shirking is $400. Monitoring devices have been installed so that there is a 50% chance of being caught if you are shirking. The company is considering the installation of additional monitoring devices to increase the chance of catching a shirker to 100%. They feel this is needed to deter all shirking. What is your recommendation
to the company? Explain.
What will be an ideal response?
Shirking is already deterred; the company does not need any more monitoring devices. The employee gains $400 by shirking but has an expected loss of $500 (loses $1,000 with 50% probability).
Economics
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Fill in the blank(s) with the appropriate word(s).
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A. exceeds; below; negative B. is below; below; negative C. exceeds; above; positive D. is below; above; negative
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