What is one potential problem with offering a choice of contracts to two different employees?
A) If Employee A is paid more than Employee B, Employee A might sue for discrimination.
B) Employee A might be paid less than Employee B, proving statistical discrimination.
C) The two employees might compare salaries without comparing risk-preferences, thereby running the risk of jealousy or claims of discrimination.
D) The two employees might compare risk preferences without comparing salaries, thereby running the risk of jealousy or claims of discrimination.
Question 2
If good salespeople are extremely risk averse, then a choice between a fixed-fee contract and a contingent contract
A) avoids a moral hazard.
B) will result in all job candidates choosing the contingent contract.
C) will result in an efficient contract.
D) may not be a good screening device.
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