What Is an Advantage of Bonuses Over Merit-Based Pay Plan

question 29

Multiple Choice

What is an advantage of bonuses over merit-based pay plan?

• A) Employees don't view bonuses as a part of their salary.
• B) Bonuses improve flexibility of the workforce.
• C) Bonuses are paid based on a formula.
• D) Bonuses improve performance of the group as a whole.
• E) Employees are rewarded for recent performance.

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Definitions:

MC

An abbreviation commonly used for "Marginal Cost," which refers to the additional cost incurred by producing one more unit of a good or service.

Liability Rule

A legal principle that allocates the economic burden of damages to the party responsible for causing harm.

Coase Theorem

A principle stating that if trade in an externality is possible and there are no transaction costs, parties will negotiate to produce an efficient outcome.

Free-Rider Problem

A situation in which individuals benefit from resources or services without paying for them, leading to underprovision of those goods.