An employee gains $500 from shirking.Thus,to deter shirking,the employer makes employees post a bond equal to $1,000,and installs monitoring devices to detect shirking.What is the probability that these devices can detect shirking?
A) 30%
B) 100%
C) 50%
D) 95%

Question

Quizplus · Accepted Answer

The bond amount is double the gain from shirking, which suggests that the probability of detection should be at least 50% to ensure the expected cost of being caught (half of $1,000) outweighs the gain from shirking ($500).

An Employee Gains $500 from Shirking