A Factory Owner Wants His Workers to Produce as Many

question 65

Multiple Choice

A factory owner wants his workers to produce as many widgets as they can, so he pays his workers based on how many widgets they produce. However, in order to make sure that the workers do not rush and produce a large number of poorly made widgets, he checks the widgets at random at various stages of their manufacture. If a defect is found in a widget, the pay of the entire section of the factory responsible for that defect is docked. How is this factory owner seeking to solve the agency problem in this case?

• A) by supplying incentives so the agents act in the way the principal desires
• B) by making the agents into principals themselves
• C) by ensuring that all workers cooperate to maximise the gains of their section
• D) by maximising the information that the principal obtains about the behavior of the agents

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Definitions:

Sexual Orientation

A person’s sexual attraction to and affection for members of either the opposite or the same sex.

Regulatory Fit

A concept in psychology that suggests people are more motivated and perform better when their approach to a task matches their regulatory orientation or preferred way of pursuing goals.

Maslow's Theory

A psychological theory of human motivation that posits a hierarchy of needs, ranging from basic physiological needs to self-actualization.

Need For Achievement

The motivation to meet a high standard of excellence and accomplish challenging tasks or goals.