Examine the benefits and cons of employee pay in the form of salary and commission, or incentive pay, in terms of the moral hazard problem
Please provide the best answer for the statement.
The problem of moral hazard may be present when employees are paid a straight salary. No matter how well or poor the employees performance, they are guaranteed a certain pay. Incentive pay eliminates the moral hazard problem by paying individuals based on their performance. The more productive the worker is the higher the pay. While commission, or incentive based pay, eliminates the moral hazard problem, other issues may arise such as, employees cutting corners or using other methods to appear more productive.
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Medical research that results in a cure for a serious disease produces positive externalities. What is the impact of this positive externality on economic efficiency?
A) At equilibrium, less than the economically efficient quantity of medical research is produced. B) At equilibrium, more than the economically efficient quantity of medical research is produced. C) A deadweight loss occurs because at equilibrium the marginal social cost of medical research is greater than the marginal social benefit. D) A deadweight loss occurs because at equilibrium the marginal social cost equals the marginal social benefit.
The interest rate that banks charge other banks for overnight loans is the
A) discount rate. B) Treasury bill rate. C) prime rate. D) federal funds rate.
According to Keynes's theory of liquidity preference, velocity increases when
A) income increases. B) wealth increases. C) brokerage commissions increase. D) interest rates increase.
Educational reforms that result in improved reading and math skills of high school graduates as they enter the labor force would do what to the aggregate supply curve?
a. Shift it outward. b. Shift it inward. c. Move the economy up along the curve. d. Move the economy down along the curve.