Harvard University Once Paid Two Financial Managers, Who Helped Manage

question 93

Multiple Choice

Harvard University once paid two financial managers, who helped manage Harvard's $20 billion endowment, each about $25 million. Harvard defended their pay "as normal in the community of hedge-fund managers with which Harvard Management competes for talent." An economist probably would say that these pay levels:

• A) make sense if their marginal factor costs exceed $25 million.
• B) make sense if the value of their marginal product exceeds $25 million.
• C) makes sense if their efficiency value calculates out to that level.
• D) does not make sense because Harvard has the option of simply putting its funds into a random selection of assets that would do as well.

---

Definitions:

Socially Constructed

A concept or perception developed and maintained through social or cultural agreement rather than stemming from inherent qualities.

Sociologists

Experts who study societies, including their institutions, cultures, development, and interaction among individuals and groups.

Rehabilitation

A process designed to restore physical, sensory, or mental capabilities that have been lost or diminished due to injury, illness, or disability.

Socially Constructed

Something that is understood or created through social interactions and agreements rather than inherently existing in nature.