Asked by Juliana Ferranti on Jun 28, 2024
Verified
Why do workers tend to choose low effort levels when they are compensated with fixed wage payments?
A) Workers ignore the cost of effort.
B) The net compensation after deducting the cost of effort is always higher when the worker provides low effort.
C) Workers care more about the stability of income than the level of income.
D) Workers tend to be risk averse and tend to choose low-intensity alternatives.
Fixed Wage Payments
Regular, consistent payments made to employees, not dependent on hours worked or performance levels.
Low Effort
Minimal exertion or investment of resources towards achieving a task or objective, often resulting in suboptimal outcomes.
Cost of Effort
The expenditure, both physical and mental, that a person invests in performing a task or achieving an outcome.
- Gain proficiency in and employ the principal-agent framework within multiple business settings, including those related to pay schemes.
Verified Answer
Learning Objectives
- Gain proficiency in and employ the principal-agent framework within multiple business settings, including those related to pay schemes.
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