Questions:
1.What term best describes an agent who is indifferent between a sure thing and a gamble of equal expected value?
A. Risk seeking
B. Risk averse
C. Risk sharing
D. Risk premium
E. Risk neutral
2.Which of the following terms describes a contract by which the value of the compensation depends on the measured performance of the employee?
A. Implicit incentive contract
B. Explicit incentive contract
C. Risk sharing contract
D. Pay-for-performance contract
E. Compensation contract
3.Which of the following terms describes a phenomenon whereby individuals ignore their own information about the best course of action and instead simply do what everyone else is doing?
A. Relative performance
B. Herding
C. Pay-for-performance
D. Absolute performance
E. Risk sharing
4. Which of the following terms describes a contract based on information that cannot be observed by courts or arbitrators?
A. Pay-for-performance
B. Risk sharing contract
C. Explicit incentive contract
D. Implicit incentive contract
E. Compensation contract
5. What type of performance measurement based process was used to determine Jack Welch's successor, Jeffrey Immelt, as CEO of GE?
A. Merit ratings system
B. Promotion tournament
C. Ratings compression
D. Management-by-objective system
E. 360-degree peer review system
6. Which of the following terms best describes a contract that guarantees an agent some payment, but provides enough incentive so that the agent does not shirk?
A. Risk premium contract
B. Risk-averse contract
C. Risk-sharing contract
D. Variability reduction contract
E. Certainty equivalent contract
6. What term best describes the payment which must be offered to a risk-averse individual to willingly accept a gamble?
A. Certainty equivalent
B. Risk equivalent
C. Certainty payment
D. Risk preference payment
E. Risk premium