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.

Question

Quizplus · Accepted Answer

When compensated with fixed wage payments, workers tend to choose low effort levels because the net compensation they receive after deducting the cost of effort is always higher when they provide less effort. This is known as the shirking model in economics.

Why Do Workers Tend to Choose Low Effort Levels When