A Firm Uses an Efficiency Wage Scheme to Deter Workers

question 76

Multiple Choice

A firm uses an efficiency wage scheme to deter workers from shirking,which is detected 10% of the times.Suppose a risk-neutral worker.The industry ongoing wage is $3,000.The efficiency wage paid by this firm is $8,000.What is this worker's reservation wage?

• A) $400
• B) $500
• C) $1,000
• D) $1,500

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Definitions:

Passive Loss Limitation

Tax rules that limit the amount of passive losses (from activities in which the taxpayer does not materially participate) that can offset other types of income.

Tax Court Method

A legal procedure by which taxpayers can dispute the IRS's determination of their tax liability in the United States Tax Court.

Primarily Rental

A classification for a property used mainly for rental purposes, affecting tax treatment and deductions.

Plumbing Repair

Refers to the services and actions taken to fix, maintain, or install water, gas, and sewage systems in residential or commercial properties.