Use the Information Below to Answer the Following Questions

question 110

Multiple Choice

Use the information below to answer the following questions.
Fact 10.3.1 Executive Pay
Executive compensation, based on performance, can theoretically constrain pay, but companies are paying their top executives more and more. The median compensation of a CEO in 2013 was $13.9 million, up 9 percent from 2012
Source: CNBC, April 28, 2014
-Refer to Fact 10.3.1. CEO compensation schemes are designed to solve

• A)the principal-agent problem.
• B)the problem of CEOs without long-term labour contracts.
• C)the problem of slow and expansive decision-making in a complex management structure.
• D)the problem that many CEOs lose all of their wealth if the corporation goes bankrupt.
• E)the problem of the CEO being taxed twice-once on salary income and once on dividend income.

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Definitions:

Equilibrium Price

The market price where the quantity of goods supplied is equal to the quantity of goods demanded.

Price Ceiling

A government-imposed limit on how high a price is charged for a product, commodity, or service.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, resulting in a stable market condition.

Price Ceiling

A legal maximum price that can be charged for a good or service, intended to protect consumers from high prices.