Question

Which of the following statements are correct?

A. A complete contract can be written with the inclusion of piece rate pay.

B. Firms pay workers more than their reservation options so that workers do not want to leave.

C. Workers would exert effort into work if their employment rent is negative.

D. Employment rent benefits workers but harms the firms as it implies higher production costs.

Select one:

a. A, B, D

b. B, C

c. A, D

d. A, C

e. A, B

Answer 1

Let's understand this by taking each and every points.

Point A) a complete contract can be written with the inclusion of piece rate pay.

Yes this is correct because an ideal contract includes this element. There is an inclusion of piece rate pay in the contract.

Point B) Firms pay workers more than their reservation options so that workers do not want to leave.

This statement is also correct. In order to get the maximum output and to achieve the targets of the organisation it is necessary to boost the morale high of the employees. Therefore,in order to give more motivation to the employees,the organization provides more wages to the workers.

Point C) workers would exert efforts into work of their employment rent is negative.

This is an incorrect statement because when workers gets the low wages,then their morale goes down. Their motivation degrades instead of getting uprgraded. Therefore,they would not put some extra efforts in the job due to their low wages.

Point D)Employment rent benefits workers but harms the firms as it implies higher production costs.

This is an incorrect option because if there are workers then only the firms are able to earn higher profits. Without them they can't manage to get extra profits. Therefore, this statement is not valid.

So,Option d) is the correct option in this questiom i.e options Point A and Point B are correct. Rest C and D are incorrect options.

d) A and B :- correct option.