Employees at La Dola Inc often engaged in hasty decision making that resulted in losses for the company. Because employees were not individually accountable for their decisions, this trend continued
However, when the company introduced a policy of profit-sharing with its employees, they began scrutinizing their decisions carefully before implementing. Explain the reason behind the change in the employees' behavior.
Employees often do not put in their maximum efforts when they cannot be held accountable for their behavior. This was the case in La Dola Inc. before the introduction of the profit-sharing model. Such behavior is known as moral hazard. Moral hazard occurs in the labor market when employees make decisions or take actions based on their private information that is unavailable to the employers. However, when the company introduced a policy of profit-sharing with its employees, they began scrutinizing their decisions carefully before implementing. This is because the employees will lose money if the company incurs loss.
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If the amount of money received by the government from various sources exceeds the federal budget, the government resorts to deficit financing
a. True b. False Indicate whether the statement is true or false
When the price of a product rises, the increase in quantity supplied will generally be greater in the long run than the short run because
a. producers maximize short-run, not long-run, profits. b. over time, new firms will enter the industry and old firms will expand their operations in response to the price increase. c. consumers are less resistant to higher prices in the long run than in the short run because they have fewer options in the long run. d. consumer income will expand in the long run, causing resource prices to rise, which will induce producers to increase output.
At tax rates higher than the tax rate that maximizes tax revenues along a Laffer curve
A. a reduction in tax rates increases tax revenues. B. a reduction in tax rates reduces tax revenues. C. an increase in tax rates increases tax revenues. D. any variation in tax rates has no effect on tax revenues.
What do behavioral economics and neuroeconomics seek to achieve?
What will be an ideal response?