Which of the Following Is Suggested by the Risky Worker

question 12

Multiple Choice

Which of the following is suggested by the risky worker hypothesis?

• A) Risky workers have worse option values than safe workers.
• B) Firms minimize downside risk by terminating employment contracts.
• C) The worst outcome for a firm is earning small positive profits.
• D) The firm breaks even if the safe worker is a diamond in the rough.
• E) Workers have higher expected value in this model than in the efficiency wage model.

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Definitions:

Capital Gains Tax

A tax on the profit made from selling an asset for more than its purchase price, applicable to investments like stocks and real estate.

Fiscal Policy

The use of government spending and taxation to influence the economy.

Tax Increases

The act of raising governmental levies on income, property, sales, or transactions, leading to a higher financial burden on the taxed entities.

Severe Recession

A period of significant decline in economic activity across the economy that lasts for an extended period of time.