Under a Tournament Pay Scheme, the Pay Gap Between a Few

question 77

Multiple Choice

Under a tournament pay scheme, the pay gap between a few "winners" (those who receive big promotions) and other employees exceeds the productivity differences between these two groups. The reason firms might use such a scheme is that they

• A) overestimate the productivity of those who receive big promotions and inadvertently pay them "too much."
• B) gain tax advantages by paying a few workers large salaries and using fringe benefits to compensate the rest of the employees.
• C) hope to raise the productivity of those who receive big promotions because marginal productivity adjusts to equal wages.
• D) hope to raise the productivity of all other workers, who will work harder trying to gain a big promotion.

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Definitions:

Neutrons

Subatomic particles found in the nucleus of an atom, with no electric charge and a mass slightly greater than that of protons.

Carbon

A chemical element with symbol C, known as the basis of all known life on Earth, capable of forming multiple compounds including carbon dioxide and organic materials.

Ca

The chemical symbol for calcium, an element with atomic number 20, essential for living organisms, particularly in cell physiology and bone formation.

Neutrons

Electrically neutral subatomic particles found in the nucleus of an atom, contributing to the atom's mass but not its charge.