Question 1

Question text
You get paid $40,000; your next best alternative would be to get paid $20,000 in
another job; you value the disutility of work as $5,000. What is your employment rent?
a.
15,000
b.
20,000
c.
40,000
d.
60,000
Feedback
Your answer is correct.
Employment rent = wage - reservation wage (next best alternative)- disutility of work
Employment rent = 40000-20000-5000
Employment rent = 15000
The correct answer is:
15,000
Question 2

Question text
Which of these items should not be included in employment rent?
a.
Your wage
b.
The value of your work friendships
c.
The value you get from feeling you are contributing to society through your work
d.
The rent you pay on your house
Feedback
Your answer is correct.
Employment rent = value of having a job compared to not having one
The rent you pay on your house does not feature in the value of having a job
The correct answer is:
 The rent you pay on your house
Question 3

Question text
What is NOT an example of exchange/transaction costs?
a.
Identifying suppliers
b.
Negotiating contracts
c.
Monitoring compliance with the contract
d.
Costs associated with movements in the New Zealand dollar
Feedback
Your answer is correct.
Exchange costs (or transaction costs) are costs of identifying suppliers, negotiating
contracts and monitoring compliance etc.
It does not include costs associated with movements in the New Zealand dollar
(foreign currency costs)
The correct answer is:
Costs associated with movements in the New Zealand dollar
Question 4

Question text
Which of these is NOT a reason contracts can be incomplete?
a.
Information is not verifiable
b.
People are unlikely to be able to anticipate every possible thing that might happen in
future
c.
Difficulty in measuring output
d.
Running out of time to write the contract
Feedback
Your answer is correct.
The correct answer is: Running out of time to write the contract
Question 5

Question text
For an hourly wage of $10, a worker provides 0.5 units of effort. On the same isocost
curve, for an hourly wage of $15, a worker provides how many units of effort?
a.
0.75
b.
0.5
c.
1
d.
0.6
Feedback
Your answer is correct.
When wage = 10, effort = 0.5
$1 leads to 0.05 effort (0.5/10)
$15 leads to 0.05*15 = 0.75 effort
The correct answer is:
0.75
Question 6

Question text
Which of these relationships is NOT an example of a principal-agent relationship?
a.
Employee and manager
b.
Owner and manager
c.
Two team members working on a project with complete information
d.
Landlord and tenant
Feedback
Your answer is correct.
Two team members working on a project when they have complete information do not
suffer from a principal-agent problem. There is no information asymmetry and no one
can make decisions that is hidden from the other
 The correct answer is:
Two team members working on a project with complete information
Question 7

Question text
You are currently paid $40,000. If you lose your job, you are
guaranteed another job that would pay $20,000 OR you could take the
unemployment benefit worth $18,000. Assuming there are no other
costs and benefits that are relevant, what is your reservation wage?
a.
20,000
b.
18,000
c.
38,000
d.
40,000
Feedback
Your answer is correct.
Reservation wage is the value of the next best alternative. In this case
the other guaranteed job
The correct answer is:
20,000