Even though explicit contracts may lead to layoffs during recessions explicit contracts may still be efficient because such contracts ?
Correct answer: A. minimize negotiation costs
- A. minimize negotiation costs
- B. minimize unemployment effects
- C. guarantee that only the least productive workers will be laid off.
- D. will equitable spread the layoffs among junior and senior workers
Explanation
Although fixed contracts can cause layoffs when demand falls, they reduce the repeated bargaining and renegotiation required between employers and workers. This saving in negotiation costs can make explicit contracts efficient.
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