The reason for the badness of performance compensation caps.

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Answer 1

Question

Chapter 1, Problem 1MC

To determine

The reason for the badness of performance compensation caps.

Expert Solution & Answer

Explanation of Solution

The compensation cap refers to the maximum limit on the salary paid. The compensation cap encourages the employees to be productive up to this limit; but it makes the employees less productive beyond the limit or cap value. This is because the employees will not receive any benefit after this limit. Therefore, the compensation cap will affect badly on the productivity of the economy. Thus, option ‘b’ is correct.

Economics Concept Introduction

Compensation cap: Compensation cap refers to the maximum limit on the salary paid to the employees.

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Andrew’s utility depends on consuming L, hours of leisure and Y a composite good. Andrew can work as many hours as he wants to at the wage rate of w, and the price of Y is $1. Andrew’s indifference curves exhibit diminishing MRS. When Andrew’s wage rate decreases, he spends less time working. Answer the following questions using a indifference curve-budget line diagram. Explain your answers carefully. a. Does the substitution effect cause him to work less hours? (If the direction of the effect is ambiguous, say so, and show why on your diagram) b. Does the income effect cause him to work less hours? (If the direction of the effect is ambiguous, say so, and show why on your diagram)

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Answer 2

Question

Chapter 1, Problem 1MC

To determine

The reason for the badness of performance compensation caps.

Expert Solution & Answer

Explanation of Solution

The compensation cap refers to the maximum limit on the salary paid. The compensation cap encourages the employees to be productive up to this limit; but it makes the employees less productive beyond the limit or cap value. This is because the employees will not receive any benefit after this limit. Therefore, the compensation cap will affect badly on the productivity of the economy. Thus, option ‘b’ is correct.

Economics Concept Introduction

Compensation cap: Compensation cap refers to the maximum limit on the salary paid to the employees.

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Answer 3

Question

Chapter 1, Problem 1MC

To determine

The reason for the badness of performance compensation caps.

Expert Solution & Answer

Explanation of Solution

The compensation cap refers to the maximum limit on the salary paid. The compensation cap encourages the employees to be productive up to this limit; but it makes the employees less productive beyond the limit or cap value. This is because the employees will not receive any benefit after this limit. Therefore, the compensation cap will affect badly on the productivity of the economy. Thus, option ‘b’ is correct.

Economics Concept Introduction

Compensation cap: Compensation cap refers to the maximum limit on the salary paid to the employees.

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Answer 4

Question

Chapter 1, Problem 1MC

To determine

The reason for the badness of performance compensation caps.

Expert Solution & Answer

Explanation of Solution

The compensation cap refers to the maximum limit on the salary paid. The compensation cap encourages the employees to be productive up to this limit; but it makes the employees less productive beyond the limit or cap value. This is because the employees will not receive any benefit after this limit. Therefore, the compensation cap will affect badly on the productivity of the economy. Thus, option ‘b’ is correct.

Economics Concept Introduction

Compensation cap: Compensation cap refers to the maximum limit on the salary paid to the employees.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 1, Problem 1MC

To determine

The reason for the badness of performance compensation caps.

Expert Solution & Answer

Explanation of Solution

The compensation cap refers to the maximum limit on the salary paid. The compensation cap encourages the employees to be productive up to this limit; but it makes the employees less productive beyond the limit or cap value. This is because the employees will not receive any benefit after this limit. Therefore, the compensation cap will affect badly on the productivity of the economy. Thus, option ‘b’ is correct.

Economics Concept Introduction

Compensation cap: Compensation cap refers to the maximum limit on the salary paid to the employees.

Answer 6

Chapter 1, Problem 1MC

To determine

The reason for the badness of performance compensation caps.

Expert Solution & Answer

Explanation of Solution

The compensation cap refers to the maximum limit on the salary paid. The compensation cap encourages the employees to be productive up to this limit; but it makes the employees less productive beyond the limit or cap value. This is because the employees will not receive any benefit after this limit. Therefore, the compensation cap will affect badly on the productivity of the economy. Thus, option ‘b’ is correct.

Economics Concept Introduction

Compensation cap: Compensation cap refers to the maximum limit on the salary paid to the employees.

Answer 7

Chapter 1, Problem 1MC

To determine

The reason for the badness of performance compensation caps.

Answer 8

Expert Solution & Answer

Explanation of Solution

The compensation cap refers to the maximum limit on the salary paid. The compensation cap encourages the employees to be productive up to this limit; but it makes the employees less productive beyond the limit or cap value. This is because the employees will not receive any benefit after this limit. Therefore, the compensation cap will affect badly on the productivity of the economy. Thus, option ‘b’ is correct.