In the Textbook,there Is an Example of a Software Firm

question 8

Multiple Choice

In the textbook,there is an example of a software firm in which the managers provided a financial incentive to get rid of software bugs.The result was that software writers added more bugs into the software.This example shows that

• A)financial incentives should never be used.
• B)most employees are corrupt.
• C)incentives can create perverse effects.
• D)high-tech firms are unique.

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Definitions:

Perfectly Elastic

Describes a situation in economics where the quantity demanded or supplied responds infinitely to changes in price.

Down-sloping

A characteristic of certain economic graphs, like demand curves, which indicates that as the price of an item goes down, demand for it increases.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various price levels, holding all other factors constant.

Supply Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity of that good or service that a supplier is willing and able to supply at those prices.