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In Assessing a Manager's Performance, His Supervisor Determines That His

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Essay

In assessing a manager's performance, his supervisor determines that his security selection contributed nothing to his outperformance i.e., all of his outperformance came from asset allocation. Does this mean the manager should not be rewarded for outperforming the benchmark?


Definitions:

Optimal Scale

The size of a company or factory at which the costs of production are minimized and productivity is maximized.

Long-run Equilibrium

A state in economic analysis where all inputs can be adjusted, market supply meets demand, and all firms in the market earn normal profit, indicating no entry or exit from the industry.

Low Point

Refers to the lowest level or value that something can reach, often used in the context of prices, rates, or economic indicators.

Average Total Cost Curve

A graphical representation showing how the total cost per unit of output varies with the level of output, typically U-shaped due to economies and diseconomies of scale.

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