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Author Question: In the labor market, contracts are often designed to include a variable salary component that is ... (Read 74 times)

neverstopbelieb

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Question 1

Which of the following is an example of mechanism design?


◦ an employer pays all sales people a fixed salary
◦ welfare reform that limits the amount of time a person can collect benefits
◦ health insurance with zero co-pays
◦ reduced prices on bulk purchases

Question 2

In the labor market, contracts are often designed to include a variable salary component that is tied to some measure of performance. Why?


◦ Such contracts provide workers with the incentive to work hard.
◦ Most people are risk-loving and thus variability in their compensation leads to higher total utility.
◦ Labor unions demand a variable salary component.
◦ The variable component reduces wages paid by firms.


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Marked as best answer by neverstopbelieb on Apr 19, 2019

mochi09

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mochi09

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