Question

52. The principal challenge in designing firms is maximize the likelihood that

a. they are in a competitive product market.

b. they are in a monopsonistic labor market.

c. their employees are always exempt from the day to day worries of making a profit.

d. decisions makers have relevant information and incentives to make good decisions.

e. all of the above.

53. An implicit contract is usually

a. not legally binding.

b. used by American corporations in today’s business world.

c. an approach frequently used in companies that use “best practices”

d. a good idea if the parties involved are fully competent.

e. none of the above.

54. Economics typically assumes that human beings perceive work effort as

a. a form of disutility

b. utility enhancing

c. quite an enjoyable experience

d. a way to express themselves in their jobs.

e. none of the above.

55. The term “Moral Hazard” is also known as:

a. a form of disutility.

b. a postcontractual information problem

c. a precontratual information problem

d. adverse selection

e. all of the above

Answer 1

52. The principal challenge in designing firms in maximise the likelihood that decision makers have relevant information and incentives to make good decisions. Hence, option(D) is correct.

53. An implied contract is usually a good idea if the parties involved are fully competent.

54. Economics typically assumes that human beings perceive work effort as utility enhancing.

55. The term "Moral Hazard" is also known as a post contractual information problem. Because moral hazard occurs when there is asymmetric information between two parties after the deal is done. Hence, option(B) is correct.