Suppose the probability of an employee being caught shirking, q, is a function of the employer's monitoring, M, such that q = M/100. If workers must put up a $1,000 bond and the gain to each worker from shirking is $100, what is the employer's optimal level of monitoring that is just sufficient to discourage shirking?
What will be an ideal response?
Workers are deterred from shirking if q = G/B = 0.10. Ten units of monitoring are necessary to achieve q = 0.10.
You might also like to view...
Suppose the figure below shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist. 
This monopolist maximizes its profit by producing ________ textbooks per week and charging a price of ________ per textbook.
A. 100; $40 B. 100; $80 C. 150; $40 D. 150; $20
If a nation has "cheap" labor, a. it can still benefit from trade
b. it is unlikely to have a comparative advantage in the production of goods that are highly capital intensive. c. it cannot have a comparative advantage in everything. d. all of the above are true.
Discretionary fiscal policy entails
A. automatic changes in spending or taxes that occur as economic conditions change. B. changing government spending or tax policy to offset automatic stabilizers. C. legislative changes in spending or tax policies. D. actions exercised by the President alone in the United States.
When a tariff is removed from an imported product, which of the following will occur?
A. The demand curve for the imported product will shift to the right. B. The level of imports will fall. C. The supply curve for the imported product will shift to the left. D. The price paid by consumers will fall.