To induce an agent to work hard, a principal may offer the agent a bonus, in other words, an extra payment if a performance target is hit. Suppose that the agent's performance is affected by factors beyond the agent's control, for example umbrellas are demanded more on a rainy day. Under what conditions may the bonus not induce the agent to work harder?
A) The agent is very risk averse.
B) The agent is very risk loving.
C) The agent is risk neutral.
D) The principal is risk neutral.
A
You might also like to view...
Refer to Table 9-11. Prior to trade, what was the opportunity cost to produce 1 hat in Denmark?
A) 1/6 of a clock B) 1/2 of a clock C) 2 clocks D) 6 clocks
The term structure of interest rates
A) represents the relationship among the interest rates on bonds that are otherwise similar but that have different maturities. B) reflects differing tax treatment received by different instruments. C) always results in an upward-sloping yield curve. D) usually results in a downward-sloping yield curve.
Monopolistic competition describes a market with:
A. few firms that sell goods and services and some barriers to entry. B. many firms that sell goods and services that are standardized. C. many firms that sell goods and services that are similar, but slightly different. D. few firms that sell goods and services that are standardized.
If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the:
A. actual burden of this tax falls mostly on consumers. B. actual burden of this tax falls mostly on manufacturers. C. actual burden of the tax would be shared equally by producers and consumers. D. tax would clearly be a progressive tax.