An Efficient Allocation of Risk Among Employees and Owners Must

question 38

Multiple Choice

An efficient allocation of risk among employees and owners must:

• A)take into account that performance-based incentives are the sole important component of an employee's salary.
• B)take into account that attitudes toward risk differ among different people.
• C)recognize that employees have full control over their output.
• D)recognize that pooling of risks is never appropriate.

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Definitions:

Barriers

Obstacles or impediments that prevent or hinder progress, such as trade barriers which can restrict the flow of goods between countries.

Control Over Price

The ability of a company or market to influence or set the price of goods and services.

Product Differentiation

The process of distinguishing a product or service from others, to make it more attractive to a particular target market.

Total Market

The entirety of the demand and supply for a particular good or service across all its potential markets.