In the labor market, contracts are often designed to include a variable salary component that is tied to some measure of performance. Why?
A. Such contracts provide workers with the incentive to work hard.
B. Labor unions demand a variable salary component.
C. The variable component reduces wages paid by firms.
D. Most people are risk-loving and thus variability in their compensation leads to higher total utility.
Answer: A
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Suppose the production of a good results in negative externalities. If all costs are taken into account, then
A. output will occur at the socially optimal level. B. the price of the product will be higher than if all costs are not taken into account. C. more output will be produced than if all costs are not taken into account. D. a and b E. a, b, and c
Barbara just purchased a television using cash. This is an example of which function of money?
a) Barter b) Medium of exchange c) Unit of account d) Store of value
The interest rate effect helps to explain why:
A. an increase in the price level raises investment. B. a decrease in the price level reduces investment. C. an increase in the price level reduces the quantity of aggregate demand. D. a decrease in the price level reduces the quantity of aggregate demand.
Related to the Economics in Practice on page 196. The search engine business is subject to ________, which means that as the use of the search engine increases, the long-run cost to provide additional searches on that search engine will likely fall.
A. significant government regulation B. diminishing returns C. economies of scale D. diseconomies of scale