A firm uses an efficiency wage scheme to deter workers from shirking.A risk-neutral worker will not shirk if
A) the expected loss from being fired is larger than or equal to the gain from shirking.
B) the expected loss from being fired is smaller than the gain from shirking.
C) the gain from shirking is positive.
D) the expected loss from being fired is zero.

Question

Quizplus · Accepted Answer

A risk-neutral worker will not shirk if the expected loss from being fired is larger than or equal to the gain from shirking, as this ensures that the cost of losing the job outweighs any benefits from shirking.

A Firm Uses an Efficiency Wage Scheme to Deter Workers