The Principal-Agent Problem Arises in Labor Markets Because

question 293

Multiple Choice

The principal-agent problem arises in labor markets because

• A) a firm may realize excessively large profits.
• B) workers may provide less-than-expected work effort.
• C) compensating wage differences do not pay for differences in the nonmonetary aspects of jobs.
• D) human capital investments vary among workers.

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Definitions:

Brainstorming

A method used to generate creative ideas by allowing participants to offer ideas spontaneously and unjudged.

Convergent Thinking

A cognitive process where the focus is on arriving at a single, correct solution to a problem.

Functional Analysis

A study aimed at understanding the purpose or role of an entity or behavior within a system, often used in psychology to understand the causes of behavior.

Functional Fixedness

Functional fixedness is a cognitive bias that limits a person to using an object only in the way it is traditionally used, which can hinder the solving of new problems.