Suppose an employer has monitoring devices established so that the probability of an employee being caught while shirking is 0.2. If the gain to the employee from shirking is $1,000, how large a bond will deter shirking?

What will be an ideal response?


B = 1000/0.2 = $5,000. With a $5,000 bond and a 20% chance of being caught, the employee's gain from shirking just equals the expected cost of shirking.

Economics

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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower

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Personal saving

a. equals national income less personal consumption expenditures. b. is personal disposable income minus consumption expenditures. c. is the value of stocks and bonds. d. equals personal income minus taxes. e. is personal disposable income less personal taxes.

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If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall

a. True b. False Indicate whether the statement is true or false

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If the government's goal is to alter people's behavior through taxation, taxing goods with relatively elastic demand and supply would be most effective.

Answer the following statement true (T) or false (F)

Economics