Economics (AS & A Level) · Feb / March 2024 · Paper 32 · Question 8
9708Growth and survival of firms
Which type of employment contract is most likely to overcome the principal agent problem?
- Aincreasing monthly salaries of waiters in a restaurant to decrease their dependence on tips from customers
- Blinking workers’ pay with the profits of the firm to motivate them to raise the profitability of the firm
- Cmaking full fee payment in advance to a lawyer to motivate him to prepare a legal case well
- Doffering permanent contracts to give workers job security
As printed in the paper
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Correct answer: B. linking workers’ pay with the profits of the firm to motivate them to raise the profitability of the firm
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