In the Presence of Asymmetric Information, a Piece-Rate Contract

question 100

Multiple Choice

In the presence of asymmetric information, a piece-rate contract

• A)is not as good as a contract based on commissions.
• B)can lead to agents producing more output than would occur under a fixed-rent-paid-to-the-principal contract.
• C)is impossible to write.
• D)will result in the principal earning all of the profit.

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Definitions:

Union Election

A formal voting process through which workers choose whether to be represented by a union and, if so, which union will represent them in bargaining with their employer.

Union Instrumentality

The means or methods through which a labor union seeks to protect the interests of its members, such as collective bargaining and industrial action.

Job Dissatisfaction

A negative emotional state resulting from an individual’s perception of their job not meeting their expectations or needs.

Utility Maximization

The economic principle that individuals or firms aim to achieve the highest level of utility or satisfaction possible, given their resources.