In the Presence of Asymmetric Information,a Hire Contract

question 78

Multiple Choice

In the presence of asymmetric information,a hire contract

• A) achieves production efficiency.
• B) can lead to opportunistic behavior on the part of the agent.
• C) is impossible to write.
• D) will result in the principal earning all of the profit.

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Definitions:

Reduce Inputs

A cost-saving and efficiency strategy which focuses on lowering the resources (such as materials, labor, and energy) used in the production process.

Security Needs

Basic human requirements for safety and security, including physical safety, employment, resources, health, and property.

Pension Plan

A retirement plan funded by an employer, providing a fixed income to employees after they retire.

Potable Drinking Water

Water that is safe to drink or to use for food preparation, meeting the quality standards that are free from harmful contaminants.