Some of the Problems Raised by Corporate Reward Structures Include

question 21

Multiple Choice

Some of the problems raised by corporate reward structures include:

• A) focusing on long-term rather than short-term profitability.
• B) the interests of managers always being aligned with the long-range interests of the company.
• C) managers being inclined sometimes to act irresponsibly without an eye to legal trouble that may occur in the future.
• D) firms sacrificing the present for the future and thereby promoting long-term allocational inefficiency.

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Definitions:

Economic Profits

The excess of total revenues over total costs, including both explicit costs and opportunity costs, indicating a return beyond the normal profit level.

Accounting Profits

The net earnings of a company as calculated by subtracting total expenses from total revenues, according to standard accounting practices.

Perfect Competitor

A theoretical market structure where many firms sell homogeneous products, entry and exit from the market are free, and all participants have perfect information.

Perfectly Elastic

Perfectly elastic describes a situation where the quantity demanded or supplied changes by an infinite amount in response to any change in price, represented graphically as a horizontal line.