Why, in the Labor Market, Are Contracts Often Designed to Include

question 69

Multiple Choice

Why, in the labor market, are contracts often designed to include a variable salary component that is tied to some measure of performance?

• A) Such contracts are considered the fairest to employees under fair labor standard laws.
• B) Most people are risk-averse and thus variability in their compensation leads to higher total utility.
• C) Firms use such contracts to differentiate between high- and low-quality workers.
• D) These contracts tend to attract employees with the lowest probability of switching jobs.

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Definitions:

Medication

A substance used for medical treatment, especially a drug or drugs taken by mouth.

Insulin Syringes

Specialized syringes designed for injecting insulin, a hormone needed for the treatment of diabetes, with unique features for accurate dosing.

Sharps Container

A hard plastic container that is used to safely dispose of needles, scalpels, and other sharp medical instruments to prevent injury and infection.

Safety Cap

A protective cover designed to prevent accidental opening, often used on medication bottles.