TruLite is managed by Fred Powell. It has three stages of production: (1) light fabrication, (2) switch assembly, and (3) boxing. Chris Self works in the switch assembly department. He is productive and seems to work hard. Powell decides to change Chris Self's pay system to a performance-based pay system that will be determined by output per hour. Chris resists the change and asks for increase in his base pay. What is Chris Self's problem? Is he irrational or does he understand something about the production system that Fred Powell does not understand?
What will be an ideal response?
Chris is probably acting rationally. Even if he is able to obtain the same expected value of compensation under the new system, his new compensation would vary from paycheck to paycheck due to factors outside his control. Most likely he is risk averse, and is asking for an increase in the base pay portion of his compensation as a compensating differential for being asked to bear risk.
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Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result
A) the interest rate rises. B) real GDP increases. C) the demand for money curve shifts rightward. D) people buy bonds and the interest rate falls.
For most industries, average costs decrease indefinitely as output expands
a. True b. False Indicate whether the statement is true or false
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What will be an ideal response?