When Is a Piece-Rate Contract Generally Used

question 25

Multiple Choice

When is a piece-rate contract generally used?

• A) It is used when output but not labor can be observed.
• B) It is only used to avoid adverse selection.
• C) It is used when labor but not output can be observed.
• D) It is never used in practice.

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Definitions:

Actual Price Level

The current general level of prices for goods and services in an economy, which can be compared to past levels to assess inflation or deflation.

Expected Price Level

The anticipated average price of goods and services in an economy over a future period, which influences consumer and business decisions.

Long-Run Aggregate-Supply

The total output of an economy when all resources are fully employed, with prices of inputs and outputs able to adjust to any changes.

Real GDP

The inflation-adjusted value of all goods and services produced within a country's borders in a year, reflecting the actual productivity of an economy.