In the Rat Race Model, Workers Competing for a Promotion

question 16

Multiple Choice

In the rat race model, workers competing for a promotion work more hours to signal that they are willing to work long hours. What is unusual is that even those who like to work long hours end up working even longer hours. Why is this?

• A) They are more risk-adverse.
• B) They need to outdo workers who don't like long hours but are willing to work temporarily long hours to get the promotion.
• C) Their excess work is an example of moral hazard.
• D) They find that excessive work hours are enjoyable and healthy.

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Definitions:

Overhead Costs

Indirect costs of running a business that are not directly tied to a specific product or service, such as rent, utilities, and insurance.

Product Costing

The method used to assign costs to a product, including direct materials, direct labor, and overhead expenses.

Cost Driver

An activity or factor that incurs costs based on its level of use or consumption, influencing the total cost of production.

Activity Level

A measure of the volume or quantity of production or operations in a business, which can significantly impact costs.