How can a corporation's board of directors and its managers try to reduce the principal-agent problem?
What will be an ideal response?
A corporation's board of directors can try to reduce the principal-agent problem by designing compensation policies for top managers that give them financial incentives to increase profits. A corporation's managers can try to reduce the principal-agent problem by designing compensation policies that give workers an incentive to work harder.
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Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor force participation rate is 80 percent and the working-age population is 500 million people. What number of people are unemployed?
What will be an ideal response?
A society that is producing on its production possibilities frontier is
A) not utilizing all of its resources. B) not being technologically efficient. C) producing too much output. D) fully utilizing all of its productive resources.
Joe runs a pizzeria at a busy place in a city. Around 125 customers visit every day and they each buy 3 pizzas on average. Joe has employed 20 laborers to make pizzas. The productivity of one laborer per day in the pizzeria is equal to _____
a. 6.25 pizzas per worker b. 18.75 pizzas per worker c. 6.67 pizzas per worker d. 41.67 pizzas per worker e. 20.75 pizzas per worker
Which of the following statements is false?
A) Asymmetric information can exist both before and after a transaction. B) Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party. C) Adverse selection has the potential to eliminate some markets. D) none of the above