Norah works as a content writer for an online magazine. Because ...

[future617RT]

Norah works as a content writer for an online magazine. Because her work is not evaluated daily, she often spends her time playing online games, which adversely affects the quality of her work.
 
  a) What is the term used to refer to such behavior? b) What is the solution to this problem? Explain your answer.

Question 2

The above table shows production points on Sweet-Tooth Land's production possibilities frontier. What is the opportunity cost of one can of cola if Sweet-tooth Land moves from point C to point B?
 
  A) 20 chocolate bars per can of cola
  B) 10 chocolate bars per can of cola
  C) 2 chocolate bars per can of cola
  D) 1/2 chocolate bars per can of cola

[momtoalll]

Answer to Question 1

a) The term used to refer to Norah's behavior is moral hazard. Moral hazard refers to actions that individuals take based on their own private information that is unavailable to the other party in the transaction but adversely affects their payoff. In this case, only Norah knows how much attention she pays to her work. This information is unavailable to her boss.
b) The management can motivate workers like Norah to work harder by offering efficiency wages. Efficiency wages are wages above the lowest pay that workers would accept and that employers use to increase workers' motivation and productivity.

Answer to Question 2

D

[future617RT]

Wow, this really help

[yeungji]

YES! Correct, THANKS for helping me on my review