What are the factors that favor high incentive pay for an employee? Explain which of the five factors is the most important.
What will be an ideal response?
The following are factors that favor high incentive pay for an employee:
The value of output is sensitive to the employee's effort;
The employee is not very risk-averse; The level of risk that is beyond the employee's control is low;
The employee's effort response to increased incentives is high;
The employee's output can be measured at low cost.
Employers should take into account all these factors when designing optimal compensation plans. The first four factors affect the employee's decisions of effort and whether to accept the compensation contract. The employee's effort decision affects profit. In addition, the fifth factor affects profit via the cost of setting up the performance evaluation system.
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What does the quantity theory of money imply? If the growth rate of money supply and growth rate of real GDP in an economy are 8% and 6%, respectively, then what is the inflation rate in the economy?
What will be an ideal response?
According to economic analysis, the optimal level of pollution is
A) always zero. B) at the point at which the marginal benefits of pollution control exceed the marginal cost. C) at the point at which the marginal benefits of pollution control are less than the marginal cost. D) at the point at which the marginal benefits from pollution control are equal to the marginal cost.
Cartel members have an incentive to cheat on the cartel because:
a. the cartel does not maximize profits. b. the cartel price is the competitive price. c. each member's output quota is too high. d. each member's MR is not equal to the cartel's MC. e. the industry profit would be higher under competitive conditions.
Suppose that Venezuela experiences significant capital outflows after a recent election. If the nation had fixed exchange rates, these flows would have had the following effect on the financial account and monetary base
a. Financial account would rise and monetary base would fall. b. Financial account would not change and monetary base would fall. c. Financial account would fall and monetary base would not change. d. Financial account would fall and monetary base would fall. e. Financial account would fall and monetary base would rise.