In the Labor Market, Contracts Are Often Designed to Include

question 19

Multiple Choice

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) Most people are risk-loving and thus variability in their compensation leads to higher total utility.
• C) Labor unions demand a variable salary component.
• D) The variable component reduces wages paid by firms.

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Definitions:

Specific Nerve Energies

The concept that different sensory nerves convey specific qualities of sensations to the brain, such as sight or sound.

Dualism

A philosophical concept that sees mind and body as two distinct entities that interact and influence each other.

Brain

The central organ of the human nervous system, responsible for thought, memory, emotion, touch, motor skills, vision, breathing, temperature, hunger, and every process that regulates our body.

Reflex Arc

A neural pathway that mediates an automatic response to a stimulus, involving sensory input and motor output without conscious thought.