Given a Series of Employment Contracts with the Same Slope

question 11

Multiple Choice

Given a series of employment contracts with the same slope (where slope refers to how the contract varies with changes in the firm's gross profits) but different intercepts (referring to the overall generosity of the contract) .Which of these is not a consideration in figuring out which of these intercepts the shareholders would decide to build into the contract offered to the manager?

• A) if too generous a contract is offered, this comes out of the firm's bottom-line profit.
• B) if too generous a contract is offered, the manager may become lazy and not exert the required effort.
• C) if the contract isn't generous enough, the manager will decide to work elsewhere.
• D) if the contract isn't generous enough, only low-ability managers will apply.

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Definitions:

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The practice of cultivating the land and raising livestock for food, fiber, and other products.

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A large house on a plantation, typically in the American South, which was the residence of the plantation owner and served as the administrative center of the estate.

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Organized groups of white men who monitored and enforced discipline upon black slaves in the antebellum Southern United States.

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