Question 1

What are the two major limitations of objective incentive payment (OIP)schemes?

Accepted Answer

A)  OIP schemes encourage an emphasis on quantity at the expense of quality and the firm must use costly monitoring technology. 
B)  Most professions have output that is easy to quantify and the firm must use costly monitoring technology. 
C)  OIPs encourage shirking and the firm must use costly monitoring technology. 
D)  OIP schemes do not encourage productivity as much as wages do and the firm cannot measure subjective quality. 
E)  OIPs encourage an emphasis on quantity at the expense of quality and the firm cannot measure subjective quality. 
A)  OIP schemes encourage an emphasis on quantity at the expense of quality and the firm must use costly monitoring technology. 
B)  Most professions have output that is easy to quantify and the firm must use costly monitoring technology. 
C)  OIPs encourage shirking and the firm must use costly monitoring technology. 
D)  OIP schemes do not encourage productivity as much as wages do and the firm cannot measure subjective quality. 
E)  OIPs encourage an emphasis on quantity at the expense of quality and the firm cannot measure subjective quality. A

Question 2

Which of the following is NOT true of tournaments?

Accepted Answer

A)  A tournament has a fixed set of prizes. 
B)  Tournaments use subjective rankings. 
C)  Tournaments are opposed by unions. 
D)  Prizes are allocated on the basis of cardinal rankings. 
E)  The payment of discretionary bonuses is an example of a tournament. 
A)  A tournament has a fixed set of prizes. 
B)  Tournaments use subjective rankings. 
C)  Tournaments are opposed by unions. 
D)  Prizes are allocated on the basis of cardinal rankings. 
E)  The payment of discretionary bonuses is an example of a tournament. D

Question 3

Which of the following is NOT true of soft information?

Accepted Answer

A)  Soft information cannot be measured by objective performance measures. 
B)  Work quality is an example of soft information. 
C)  Soft information cannot be proven in a court of law. 
D)  Soft information is verifiable. 
E)  Worker ability is an example of soft information. 
A)  Soft information cannot be measured by objective performance measures. 
B)  Work quality is an example of soft information. 
C)  Soft information cannot be proven in a court of law. 
D)  Soft information is verifiable. 
E)  Worker ability is an example of soft information. D

Question 4

Which of the following is NOT a reason incentive mechanisms are used in an organization?

Accepted Answer

A)  Principals who own the firm have an incentive to shirk. 
B)  Agents seek to maximize their own utilities. 
C)  Workers at every level of an organization,including CEOs,are principals. 
D)  Incentive mechanisms work by better aligning the interest of workers with the firm's profit-maximizing goals. 
E)  Tournaments induce relatively high-effort levels. 
A)  Principals who own the firm have an incentive to shirk. 
B)  Agents seek to maximize their own utilities. 
C)  Workers at every level of an organization,including CEOs,are principals. 
D)  Incentive mechanisms work by better aligning the interest of workers with the firm's profit-maximizing goals. 
E)  Tournaments induce relatively high-effort levels.

Question 5

Which of the following is an example of cream skimming?

Accepted Answer

A)  hiring workers of a certain religion because they are thought to be hard workers 
B)  admitting only the best students to a new charter school for the underprivileged in order to have better average test scores 
C)  awarding prizes to top performers 
D)  creating a tournament scheme in order to induce workers to exert higher effort 
E)  teachers cheating on standardized tests because their compensation is tied to students' test scores 
A)  hiring workers of a certain religion because they are thought to be hard workers 
B)  admitting only the best students to a new charter school for the underprivileged in order to have better average test scores 
C)  awarding prizes to top performers 
D)  creating a tournament scheme in order to induce workers to exert higher effort 
E)  teachers cheating on standardized tests because their compensation is tied to students' test scores

Question 6

Which of the following is NOT a reason the incentive effects of OIP schemes are difficult to measure?

Accepted Answer

A)  Cross-sectional data inherently involves comparisons of different workers at the same point in time. 
B)  It is impossible to discern whether the observed earnings differences in cross sectional data result from incentives to work harder or from systematic unobserved differences in workers who select into different earnings schemes. 
C)  Theoretically,workers with higher abilities will tend to select into OIP schemes. 
D)  Workers with higher ability are able to produce more output. 
E)  Workers do not increase effort under OIP schemes. 
A)  Cross-sectional data inherently involves comparisons of different workers at the same point in time. 
B)  It is impossible to discern whether the observed earnings differences in cross sectional data result from incentives to work harder or from systematic unobserved differences in workers who select into different earnings schemes. 
C)  Theoretically,workers with higher abilities will tend to select into OIP schemes. 
D)  Workers with higher ability are able to produce more output. 
E)  Workers do not increase effort under OIP schemes.

Question 7

In an environment ______ with workers,both OIPs and salaries can exist.______ attract high-ability workers while ______ attract low-ability workers.

Accepted Answer

A)  homogeneous;OIP schemes;salaried schemes 
B)  heterogeneous;OIP schemes;salaried schemes 
C)  homogeneous and heterogeneous;OIP schemes;salaried schemes 
D)  homogeneous;salaried schemes;OIP schemes 
E)  heterogeneous;salaried schemes;OIP schemes 
A)  homogeneous;OIP schemes;salaried schemes 
B)  heterogeneous;OIP schemes;salaried schemes 
C)  homogeneous and heterogeneous;OIP schemes;salaried schemes 
D)  homogeneous;salaried schemes;OIP schemes 
E)  heterogeneous;salaried schemes;OIP schemes

Question 8

In the principal-agent model,the shock ______ verifiable ex post and the agent's effort ______ verifiable ex post.

Accepted Answer

A)  is;is 
B)  is;is not 
C)  is not;is 
D)  is not;is not 
E)  may be;is 
A)  is;is 
B)  is;is not 
C)  is not;is 
D)  is not;is not 
E)  may be;is

Question 9

Which of the following is true of hard information?

Accepted Answer

A)  Hard information can be measured subjectively. 
B)  Hard information is inherently unverifiable. 
C)  Hard information is verifiable in court. 
D)  Hard information cannot be measured objectively. 
E)  Workers' ability is an example of hard information. 
A)  Hard information can be measured subjectively. 
B)  Hard information is inherently unverifiable. 
C)  Hard information is verifiable in court. 
D)  Hard information cannot be measured objectively. 
E)  Workers' ability is an example of hard information.

Question 10

The ratchet effect arises from the principal's ______.As a result,agents have an incentive _____to.

Accepted Answer

A)  lack of knowledge about workers' true abilities;shirk. 
B)  desire for the agents to increase productivity;underperform 
C)  desire for the agents to increase productivity;shirk 
D)  inability to precommit to a piece rate;underperform 
E)  lack of knowledge about workers' true abilities;shirk 
A)  lack of knowledge about workers' true abilities;shirk. 
B)  desire for the agents to increase productivity;underperform 
C)  desire for the agents to increase productivity;shirk 
D)  inability to precommit to a piece rate;underperform 
E)  lack of knowledge about workers' true abilities;shirk

Question 11

Why might an employer use an incentive scheme rather than attempt to measure worker productivity?

Accepted Answer

A)  Worker productivity can be determined by objective measures. 
B)  It is inexpensive to determine worker productivity over time. 
C)  Worker productivity is not based on effort. 
D)  Worker productivity is subjective. 
E)  Worker productivity is an example of hard information. 
A)  Worker productivity can be determined by objective measures. 
B)  It is inexpensive to determine worker productivity over time. 
C)  Worker productivity is not based on effort. 
D)  Worker productivity is subjective. 
E)  Worker productivity is an example of hard information.

Question 12

The value of a worker's output ______ a simple function of the units of output produced and can be measured ______.

Accepted Answer

A)  is;by subjective measures 
B)  is;by both objective and subjective measures 
C)  is not;by objective measures 
D)  is not;by both objective and subjective measures 
E)  is not;by subjective measures 
A)  is;by subjective measures 
B)  is;by both objective and subjective measures 
C)  is not;by objective measures 
D)  is not;by both objective and subjective measures 
E)  is not;by subjective measures

Question 13

In the principal-agent model,output ______ verifiable ex post and the price verifiable ex post.

Accepted Answer

A)  is;is 
B)  is;is not 
C)  is not;is 
D)  is not;is not 
E)  may be;is 
A)  is;is 
B)  is;is not 
C)  is not;is 
D)  is not;is not 
E)  may be;is

Question 14

According to Kerr's folly,

Accepted Answer

A)  workers will neglect duties that are not tied directly to their compensation. 
B)  firms that discriminate have lower profits than do firms that do not discriminate. 
C)  low-ability workers will attempt to pass themselves off as high-ability workers. 
D)  teachers will cheat on standardized tests because their compensation is tied to students' test scores. 
E)  low-ability workers produce as much output as high-ability workers under an OIP scheme. 
A)  workers will neglect duties that are not tied directly to their compensation. 
B)  firms that discriminate have lower profits than do firms that do not discriminate. 
C)  low-ability workers will attempt to pass themselves off as high-ability workers. 
D)  teachers will cheat on standardized tests because their compensation is tied to students' test scores. 
E)  low-ability workers produce as much output as high-ability workers under an OIP scheme.

Question 15

In the principal-agent model,the standard deviation of the expected value of effort:

Accepted Answer

A)  decreases with the riskiness of the outcome. 
B)  captures the inherent riskiness of the environment. 
C)  is equal to zero. 
D)  is proportional to the marginal disutility of effort. 
E)  is increasing in a worker's ability. 
A)  decreases with the riskiness of the outcome. 
B)  captures the inherent riskiness of the environment. 
C)  is equal to zero. 
D)  is proportional to the marginal disutility of effort. 
E)  is increasing in a worker's ability.

Question 16

In a tournament,the optimal prize spread must ______ with the number of competitors in order to maintain high-effort incentives.This proposition has received wide empirical support using data on ______ .

Accepted Answer

A)  decrease;CEO compensation 
B)  decrease;unionized workers 
C)  increase;CEO compensation 
D)  increase;unionized workers 
E)  not change;CEO compensation 
A)  decrease;CEO compensation 
B)  decrease;unionized workers 
C)  increase;CEO compensation 
D)  increase;unionized workers 
E)  not change;CEO compensation

Question 17

Gainsharing plans suffer from the ______,which stems from the incentives for agents to others' work.

Accepted Answer

A)  1/N problem;sabotage 
B)  1/N problem;free ride on 
C)  N problem;sabotage 
D)  N problem;free ride on 
E)  N×N problem;sabotage 
A)  1/N problem;sabotage 
B)  1/N problem;free ride on 
C)  N problem;sabotage 
D)  N problem;free ride on 
E)  N×N problem;sabotage

What are the two major limitations of objective incentive payment (OIP)schemes?

Which of the following is NOT true of tournaments?

Which of the following is NOT true of soft information?

Which of the following is NOT a reason incentive mechanisms are used in an organization?

Which of the following is an example of cream skimming?

Which of the following is NOT a reason the incentive effects of OIP schemes are difficult to measure?

In an environment with workers,both OIPs and salaries can exist. attract high-ability workers while __ attract low-ability workers.

In the principal-agent model,the shock verifiable ex post and the agent's effort verifiable ex post.

Which of the following is true of hard information?

The ratchet effect arises from the principal's __.As a result,agents have an incentive _to.

Why might an employer use an incentive scheme rather than attempt to measure worker productivity?

The value of a worker's output a simple function of the units of output produced and can be measured .

In the principal-agent model,output ______ verifiable ex post and the price verifiable ex post.

According to Kerr's folly,

In the principal-agent model,the standard deviation of the expected value of effort:

In a tournament,the optimal prize spread must with the number of competitors in order to maintain high-effort incentives.This proposition has received wide empirical support using data on .

Gainsharing plans suffer from the ______,which stems from the incentives for agents to others' work.

Introduction

The Uslabor Market

The Short Run Demand for Labor

The Supply of Labor

Human Capital

On-The-Job Training

Competitive Equilibrium

Policy Application: the Minimum Wage

Policy Application: the War on Poverty

Death and Injury in the Usworkplace-A Hedonic Analysis

Discrimination I: Theory

Discrimination Ii: Evidence and Policy

The Hiring Process

Tasks,technologies,and Organizational Design

Careers and the Employment Relation

The Long Run Demand for Labor and Adjustment Costs

Filters

Exam 14: Incentives

What are the two major limitations of objective incentive payment (OIP)schemes?

Which of the following is NOT true of tournaments?

Which of the following is NOT true of soft information?

Which of the following is NOT a reason incentive mechanisms are used in an organization?

Which of the following is an example of cream skimming?

Which of the following is NOT a reason the incentive effects of OIP schemes are difficult to measure?

In an environment ______ with workers,both OIPs and salaries can exist.______ attract high-ability workers while ______ attract low-ability workers.

In the principal-agent model,the shock ______ verifiable ex post and the agent's effort ______ verifiable ex post.

Which of the following is true of hard information?

The ratchet effect arises from the principal's ______.As a result,agents have an incentive _____to.

Why might an employer use an incentive scheme rather than attempt to measure worker productivity?

The value of a worker's output ______ a simple function of the units of output produced and can be measured ______.

In the principal-agent model,output ______ verifiable ex post and the price verifiable ex post.

According to Kerr's folly,

In the principal-agent model,the standard deviation of the expected value of effort:

In a tournament,the optimal prize spread must ______ with the number of competitors in order to maintain high-effort incentives.This proposition has received wide empirical support using data on ______ .

Gainsharing plans suffer from the ______,which stems from the incentives for agents to others' work.

Introduction

The Uslabor Market

The Short Run Demand for Labor

The Supply of Labor

Human Capital

On-The-Job Training

Competitive Equilibrium

Policy Application: the Minimum Wage

Policy Application: the War on Poverty

Death and Injury in the Usworkplace-A Hedonic Analysis

Discrimination I: Theory

Discrimination Ii: Evidence and Policy

The Hiring Process

Tasks,technologies,and Organizational Design

Careers and the Employment Relation

The Long Run Demand for Labor and Adjustment Costs

Filters

In an environment with workers,both OIPs and salaries can exist. attract high-ability workers while __ attract low-ability workers.

In the principal-agent model,the shock verifiable ex post and the agent's effort verifiable ex post.

The ratchet effect arises from the principal's __.As a result,agents have an incentive _to.

The value of a worker's output a simple function of the units of output produced and can be measured .

In a tournament,the optimal prize spread must with the number of competitors in order to maintain high-effort incentives.This proposition has received wide empirical support using data on .