Economics 9708 · AS & A Level · 7.8

7.8 — practice question

Which type of employment contract is most likely to solve 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

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