Consider an apple orchard owner deciding how to incentivize his fruit pickers. He pays per pound harvested but adjusts the compensation rate higher during poor harvest seasons. As a consequence

a. The picker's effort would not depend on the compensation rate b. The pickers would claim poor harvests in order to be paid higher piece rates even during bountiful harvest seasons c. The pickers would claim good harvests in order to be paid higher piece rates even during poor harvest seasons d. None of the above

The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas, TX based restaurants to compare the sales of these restaurants to the ones with no new flavors. She decides to run a difference in difference approach. Which of the following is true?

a. The first difference would be the difference in the sales of the Dallas stores before and after the introduction b. The second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor c. The second difference would be the difference between the post introduction sales in the Dallas stores and the control group d. Only A&B

Use the following setup for questions 49-52

Consider a non-strategic game between a firm and its union. The value to the firm of getting the workers back to work is $5 million. The union's agreement value to get back to work is $5 million. The firm can hire nonunion workers, "scabs", so their disagreement value is 1 million and the union members can find temporary employment elsewhere, making the unions disagreement value $2million.

The firm would have a better bargaining position in the negotiations if

a. It can hire the non union "scabs" at a better wage b. The union has younger workers who cannot afford to be off work c. The union has a strike fund to pay workers during work stoppage actions d. Only A&B

A shoe salesman working on commission must decide whether to work hard or shirk. Working hard would increase the probability of a sale from 20% to 70% but would cost him $5. If the average price of shoes is $100, what is the minimum commission rate would induce him to work hard?

a. 4% b. 6% c. 8% d. 10%

An acquisition will not be profitable

a. In any circumstances b. As long as you paid lower than the company's discounted future profits c. Without a synergy that makes the company more valuable to you than to the current owner d. None of the above

A random variable is

a. A variable that takes of values that are uncertain b. A variable that takes on known values c. A variable that is always zero d. A variable that takes on null values only

To incentivize R&D, the government proposes to take on a company's costs if its product does not succeed. This would lead to

a. The company developing a lot more products with a low risk of failure b. The company developing a lot more products with a high risk of failure c. The company developing no high risk products d. The company going bankrupt

Adopt incentive compensation

a. Under all circumstances since it is the best solution b. Only if it is effective in making the agent work harder c. Only if its results exceed its costs d. Only B&C