Socially inefficient outcomes are possible when
A) uninformed parties want to avoid opportunistic behavior by informed parties.
B) informed parties engage in opportunistic behavior against uninformed parties.
C) those in charge are risk neutral.
D) workers do not own the firm.
QUESTION 2Assume a firm is run as a zero-profit enterprise. Which of the following would be TRUE?
A) There is a higher probability that wage reductions would outweigh layoffs.
B) Those in charge would not act any different than regular owners, there would still be layoffs.
C) Those not in charge would remain risk neutral.
D) Wage reductions would be lower than they would be if the firm was run for profit.
QUESTION 3If a firm was owned by its employees,
A) there is a higher probability that wage reductions would outweigh layoffs.
B) those in charge would not act any differently than regular owners; there would still be layoffs.
C) those not in charge would remain risk neutral.
D) wage reductions would be lower than if the firm was run for profit.
QUESTION 4A deferred payment scheme is more likely to be accepted by a worker if
A) the firm has a reputation of not firing senior employees to save pension costs.
B) the worker is very young.
C) the worker is very old.
D) None of the above.
QUESTION 5Wage reduction policies are less common than layoffs because
A) workers never prefer wage reduction policies.
B) workers always trust the firm to tell the truth.
C) of asymmetric information.
D) of adverse selection problems.
QUESTION 6Workers can reduce the chance of an employer lying by
A) obtaining more information about the firm's performance.
B) having a representative on the board of directors.
C) requiring that employers share the cost of an economic downtown.
D) All of the above.
QUESTION 7Under deferred compensation packages,
A) a moral hazard occurs if a firms fires a good worker before the worker receives her deferred compensation.
B) a moral hazard occurs if workers decide not to shirk so as to receive the deferred compensation.
C) moral hazards are avoided.
D) workers' wages are below their marginal revenue product as they near retirement.
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