What Is One Potential Problem with Offering a Choice of Contracts

question 105

Multiple Choice

What is one potential problem with offering a choice of contracts to two different employees?

• A) If Employee A is paid more than Employee B, Employee A might sue for discrimination.
• B) Employee A might be paid less than Employee B, proving statistical discrimination.
• C) The two employees might compare salaries without comparing risk-preferences, thereby running the risk of jealousy or claims of discrimination.
• D) The two employees might compare risk preferences without comparing salaries, thereby running the risk of jealousy or claims of discrimination.

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Definitions:

Maximizing Profits

The process or strategy of adjusting the production and sale of goods and services to achieve the highest possible profit.

Fixed Costs

Costs that do not change with the level of output produced, such as rent, salaries, or insurance expenses.

Maximizing Profits

The process of increasing the difference between revenue and costs to achieve the highest possible financial gain.

Economic Profit

The surplus remaining after total costs are subtracted from total revenue, considering both explicit and implicit costs.