A firm uses an efficiency wage scheme to deter workers from shirking, which is detected 10 of the times. Suppose a risk-neutral worker. The industry ongoing wage is 3,000. The efficiency wage paid by this firm is 8,000. What is this worker's reservation wage?
A) 400
B) 500
C) 1,000
D) 1,500
QUESTION 2A firm uses an efficiency wage scheme to deter workers from shirking, which is detected 10 of the times. Suppose a risk-neutral worker that has a reservation wage of 500. The efficiency wage paid by this firm is 7,000. What is the industry ongoing wage?
A) 1,000
B) 5,000
C) 1,500
D) 2,000
QUESTION 3A firm uses an efficiency wage scheme to deter workers from shirking, which is detected 10 of the times. Suppose a risk-neutral worker that has a reservation wage of 500. The industry ongoing wage is 1000. What is the efficiency wage paid by this firm?
A) 6,000
B) 5,000
C) 1,500
D) 2,000
QUESTION 4A firm uses an efficiency wage scheme to deter workers from shirking. A risk-neutral worker will NOT shirk if
A) the expected loss from being fired is larger than or equal to the gain from shirking.
B) the expected loss from being fired is smaller than the gain from shirking.
C) the gain from shirking is positive.
D) the expected loss from being fired is zero.
QUESTION 5An employee gains 500 from shirking. Thus, to deter shirking, the employer makes employees post a bond equal to 1,000, and installs monitoring devices to detect shirking. What is the probability that these devices can detect shirking?
A) 30
B) 100
C) 50
D) 95
QUESTION 6In 2008, foreclosures reached a record high. Which of the following is NOT a possible reason for foreclosures?
A) Many mortgages were initiated without a down payment.
B) Many mortgages were initiated on secondary and investment homes.
C) Some mortgages were adjustable rate mortgages which might have dramatically increased monthly payments for some.
D) Property values were increasing too fast.
QUESTION 7If a professional sports athlete signs a new contract which defers compensation until years after she is retired, she is signaling
A) that she does not plan to shirk in the future, regardless of whether she did so in the past.
B) that she did shirk and she will do so in the future.
C) that she did shirk but won't do so in the future.
D) that she didn't shirk and she won't do so in the future.
QUESTION 8If all firms pay an efficiency wage, then
A) there is no cost to shirking because the shirking worker can receive his high wage at another firm after being caught and fired.
B) the macroeconomy would enjoy a prolonged period of near-zero unemployment.
C) there is a cost to shirking because the efficiency wage is less than it would have been if only a few firms paid it.
D) there is a cost to shirking because the shirking worker will spend a greater time unemployed after being caught and fired.
QUESTION 9If an additional dollar spent on monitoring would reduce shirking by 10 minutes, then the firm will increase the worker's wage by 1 if this caused
A) shirking to increase by less than 10 minutes.
B) shirking to decrease by more than 10 minutes.
C) shirking to decrease by less than 10 minutes.
D) monitoring to become unnecessary.
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