Return to the Situation with the Manager from the Previous

question 26

Multiple Choice

Return to the situation with the manager from the previous question.Now assume that shareholders cannot observe effort,so cannot specify how hard the manager works in the contract but must induce it through the incentive scheme.Which of the following wage contracts would work out best for shareholders in equilibrium?

• A) A flat wage w = 2,500 with no profit share.
• B) A share of 35% of the gross profits.
• C) A share of 55% of the gross profits.
• D) A share of 70% of the gross profits.

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Definitions:

Kohlberg

Refers to Lawrence Kohlberg, a psychologist known for his theory of moral development based on the concept of moral reasoning.

Family-Centered Approach

An approach in service delivery that emphasizes the importance of family engagement and partnership in decisions related to a child's development, healthcare, and education.

Kindergarten

A preschool educational approach traditionally based on playing, singing, practical activities such as drawing, and social interaction as part of the transition from home to school.

Abuse And Neglect

Harmful treatment or lack of proper care towards an individual, often resulting in physical, emotional, or developmental damage.