Question :
21) Economists refer to the general problem of ________ as : 1377572
21) Economists refer to the general problem of ________ as a principal-agent relationship.
A) moral hazard
B) adverse selection
C) negative externalities
D) pecuniary externalities
22) Which of the following is an example of a principal-agent relationship?
A) The relationship between two colleagues
B) The relationship between a teacher and his student
C) The relationship between an employer and a worker
D) The relationship between two nations
23) ________ wages are wages paid by employers to increase worker motivation and productivity.
A) Real
B) Nominal
C) Minimum
D) Efficiency
24) A firm is likely to pay higher efficiency wages when:
A) it is easy to monitor workers.
B) it is not easy to monitor workers.
C) workers do not have a tendency to shirk at work.
D) the minimum wages are set above the equilibrium wage rate.
Pat works in a factory which produces jam, jellies and marmalades. His job is to check if each pack of marmalade is sealed before it is dispatched for sale. Several other workers in the factory do the same job. Therefore, it is not possible for the manager of the factory to keep track of how many packs each worker actually inspects.
25) Refer to the scenario above. Which of the following problems is most likely to arise in this case?
A) Adverse selection
B) Moral hazard
C) The tragedy of the commons
D) The free-rider problem
26) Refer to the scenario above. In this case, the employer may prevent shirking by ________.
A) paying an efficiency wage to each worker
B) paying a wage less than minimum wage
C) reducing the nominal wage paid to workers
D) reducing the real wage paid to workers
Edward owns a house he inherited in a different part of the country which has been lying empty for the last few years. A housekeeper is paid regularly to look after the house and keep it clean. However, since Edward seldom visits the house, the housekeeper does not clean the house regularly.
27) Refer to the scenario above. The housekeeper’s behavior is an example of a ________.
A) moral hazard
B) positive externality
C) prisoners’ dilemma
D) tragedy of the commons
28) Refer to the scenario above. The housekeeper behaves in this particular way due to the ________.
A) existence of asymmetric information
B) presence of a positive externality
C) presence of a free-rider problem
D) existence of high incentive to work
29) Refer to the scenario above. Which of the following is true?
A) In this case, Edward is a rent seeker.
B) In this case, the housekeeper is a free rider.
C) The problem that arises in this case can be solved through bilateral negotiation.
D) The relationship between Edward and the housekeeper is an example of a principal-agent relationship.
30) Refer to the scenario above. What can Edward do to induce the housekeeper to work regularly?
A) Pay an efficient wage
B) Pay a lower money wage
C) Pay a lower real wage
D) Pay the minimum wage that he would accept