Suppose a Law Firm Negotiates a Very Low Price for Each

question 18

Multiple Choice

Suppose a law firm negotiates a very low price for each of its 1000 employees to be members at the athletic club that is located next to the law firm. Which of the following is not likely to be true?

• A) The law firm can pay its workers less than a comparable law firm that does not offer the gym benefit.
• B) The firm can likely negotiate a lower per person price at the gym than each employee could negotiate alone.
• C) Some employees will take advantage of the gym benefit, while others will not.
• D) In the long run, the law firm will probably attract workers who value the gym benefit the most.
• E) If the typical individual gym membership costs $50 per month, the law firm should expect to save $50,000 per month in wages.

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Definitions:

Corporate Bond

A type of debt security issued by a corporation to raise capital, promising to pay back the face value, along with interest, to the bondholders.

Primary Market

The market in which financial institutions aid in the sale of new securities.

New Issues

Refers to securities that are being offered to the public for the first time, such as through an initial public offering (IPO).

Stock

A type of financial security that denotes ownership in a corporation and represents a claim on part of the company's assets and earnings.