Given a Series of Contracts Offered to an Executive Having

question 13

Multiple Choice

Given a series of contracts offered to an executive having 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 executive?

• 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 executive may become lazy and not exert the required effort.
• C)if the contract isn't generous enough,the executive will decide to work elsewhere.
• D)if the contract isn't generous enough,only low-ability executives will apply.

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Definitions:

Import Quota

A governmental limit on the quantity of a certain type of good that can be imported into a country, used to protect domestic industries.

Trade Protection

Measures implemented by countries to protect their domestic industries from foreign competition, such as tariffs and quotas.

Wealth Transfer

The movement of assets from one party to another, often due to inheritance, gifts, or legal mechanisms like trusts and estates.

Domestic Producers

Refers to individuals or companies that manufacture goods or offer services within their own country.