1. In the presence of unions, efficient contracts are expected to result in the
ID: 1211405 • Letter: 1
Question
1. In the presence of unions, efficient contracts are expected to result in the hiring of _____ workers than would be hired under the labor demand curve at a given wage.
A. more
B. fewer
C. the same number of
D. None of the above is correct.
2.
A principal-agent problem involving owners and CEOs is more likely to occur when:
CEOs receive a large share of their compensation in the form of stock options.
CEOs face incentives that cause them to behave in a manner inconsistent with profit maximization.
Both of the above are correct.
None of the above is correct.
3.Time-based pay systems are more common than piece-rate pay systems because:
workers are risk averse.
firms are risk averse and prefer stable hourly pay structures to unpredictable piece rate pay structures.
Both of the above are correct.
None of the above is correct.
A.CEOs receive a large share of their compensation in the form of stock options.
B.CEOs face incentives that cause them to behave in a manner inconsistent with profit maximization.
C.Both of the above are correct.
D.None of the above is correct.
Explanation / Answer
"The principal-agent problem develops when a principal creates an environment in which an agent's incentives don't align with the principle's."
B is the right answer.
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