One Possible Solution to an Incentive Problem Arising Under Unobservable

question 21

Multiple Choice

One possible solution to an incentive problem arising under unobservable actions is:

• A)to pay more and make the worker efficient.
• B)to be the boss and fire the inefficient worker and send a signal to others.
• C)to buy the agent's right to his total output.
• D)to sell the agent the right to the total production.

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Definitions:

Episodic

Pertaining to events or experiences that are organized into discrete, individual units or episodes in memory.

Generic

Attribute or thing that is characteristic of all or most members of a class, not specific or specialized.

Intelligence Tests

Standardized assessments designed to measure a person's cognitive abilities and potential relative to a population.

Reliable

The quality of being consistently good in quality or performance, dependable.