11) Which of the following is NOT a difficulty with using a piece-rate contract? A) measuring output B) eliciting the desired behavior C) gaining worker acceptance D) workers taking too much time to achieve a certain task 12) The moral hazard associated with managers whose productivity is difficult to quantify can be decreased with A) piece-rate contracts. B) year-end bonuses. C) decreased wages. D) adverse selection. For the following, please answer "True" or "False" and explain why. 13) Production inefficiency is more likely to occur when the principal has more information about work performance than the agent does. 14) The type of contract selected depends on the information available to the parties. 15) When the production of a worker is relatively easily observable, the firm can pay a piece-rate. 16) Describe the characteristics of an efficient contract between a principal and an agent. 17) Explain how more than one possible state of nature affects contract choices. 18
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11) Which of the following is NOT a difficulty with using a piece-rate contract?
A) measuring output
B) eliciting the desired behavior
C) gaining worker acceptance
D) workers taking too much time to achieve a certain task
12) The moral hazard associated with managers whose productivity is difficult to quantify can be decreased with
A) piece-rate contracts.
B) year-end bonuses.
C) decreased wages.
D) adverse selection.
For the following, please answer "True" or "False" and explain why.
13) Production inefficiency is more likely to occur when the principal has more information about work performance than the agent does.
14) The type of contract selected depends on the information available to the parties.
15) When the production of a worker is relatively easily observable, the firm can pay a piece-rate.
16) Describe the characteristics of an efficient contract between a principal and an agent.
17) Explain how more than one possible state of nature affects contract choices.
18
