Because incentive contracts result in more risk placed on the part of agents
a. the average level of compensation typically falls
b. the average level of compensation typically rises
c. compensation is unaffected
d. employers want employees to insure against wild compensation swings
b
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A firm is more likely to use a labor-intensive method of production when the relative amount of available labor is greater than the available amount of capital
Indicate whether the statement is true or false
Refer to Figure 10.7. A movement from point D to point C could be caused by
A) a positive demand shock. B) an increase in the term premium investors expect in the future. C) an increase in the term structure effect. D) an increase in the expected rate of inflation.
If at its current production level, a perfectly competitive firm's marginal revenue and long-run marginal cost are equal to $1.50 and its long-run average cost is $1.50, which of the following statements is true?
A) The firm should expect the market price of its product to fall. B) The firm should expect to earn positive economic profit indefinitely. C) The firm should expect the market price of its product to increase. D) The firm is earning zero economic profit.
If the real rate of return is 2 percent, and the inflation rate is 0 percent, then the nominal interest rate must be:
A. 2 percent. B. 0 percent. C. 4 percent. D. ?2 percent.