ECON649/991, Importance to Introduce an Incentive | Economics

Added on -2020-02-18

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EXERCISE 1 INCOMPLETE CONTRACTSa)It would be of importance to introduce an incentive where the lecturer is paid according to the pass rate in his class. In this way the lecturer will be motivated to ensure that a good number of his students pass exams.b)It may be difficult to include the number of students the teacher can attend to at his own time. It may also be difficult to put down the method of teaching to be prescribed.EXERCISE 2 ECONOMIC RENTSa)Economic rent Earnings from actual amount = 25 *40 * 63 = 63000Expected Amount = 535 * 63/2 = 16, 852.5Economic Rent = 63, 000 – 16,852.5 - 12600 = 33, 547.5b)The employees have low welfare levels since despite their work, they are compensated by food vouchers in which they have limited options of choice compared to their needs.c)EXERCISE 3 LABOUR-DISCIPLINE MODEL

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