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

question 95

Multiple Choice

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

• A) achieves production efficiency.
• 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:

Project Management

The discipline of initiating, planning, executing, controlling, and closing the work of a team to achieve specific goals and meet specific success criteria within a specified time.

Activity Times

Duration estimates for how long individual tasks within a project or process will take to complete.

PERT Times

Estimated durations for activities involved in a project, used in the Program Evaluation and Review Technique for planning and scheduling.

Optimistic Time

The “best” activity completion time that could be obtained in a PERT network.