A Factory Owner Wants His Workers to Produce as Many

question 23

Multiple Choice

A factory owner wants his workers to produce as many widgets as they can,so he pays his workers based on how many widgets they produce.However,in order to make sure that the workers do not rush and produce a large number of poorly made widgets,he checks the widgets at random at various stages of their manufacture.If a defect is found in a widget,the pay of the entire section of the factory responsible for that defect is docked.How is this factory owner seeking to solve the principal-agent problem in this case?

• A)by supplying incentives so the agents act in the way principal desires
• B)by ensuring that all workers co-operate to maximize the gains of their section
• C)by making the agents into principals themselves
• D)by maximizing the information that the principal obtains about the behaviour of the agents
• E)by using quality control techniques

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Definitions:

Social Skills

Abilities related to effective communication, empathy, relationship-building, and interacting harmoniously with others in a variety of social contexts.

Manipulative

Inclined to influence or control others to one's own advantage, often in a deceptive way.

Low In Self-Monitoring

Describes individuals who are less adept at adjusting their behavior or appearance based on social situations or contexts.

Predictability

The ability to accurately anticipate future events or behaviors based on patterns, trends, or previous data.