How can performance-based incentives help companies facing moral hazard?
What will be an ideal response?
Moral hazard occurs in a company when employees shirk from their responsibilities. Performance-based incentives encourage workers to work harder because they would lose money by shirking. Thus, performance-based incentives help in solving the problem of moral hazard.
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Suppose that your personal valuation for a painting is $200 . Which auction format would induce you to bid more?
a. First price. b. Second price. c. You would bid the same in any format. d. Depends on the environment.
Macroeconomics is the area of economics that deals with behavior and decision making in small units
a. true b. false
Which statement is true?
A. The national debt is larger than our GDP. B. The national debt has doubled over the last two years. C. The national debt is nearly $400 billion. D. The national debt has increased every year from 1969 to 1997.
Suppose that the demand for money increases as people anticipate upcoming economic problems. To offset this increase in money demand, the Fed should ________ the money supply, which would put ________ pressure on nominal interest rates.
A. increase; upward B. decrease; downward C. decrease; upward D. increase; downward