Which of the Following Is NOT a Reason Incentive Mechanisms

question 4

Multiple Choice

Which of the following is NOT a reason incentive mechanisms are used in an organization?

• A) Principals who own the firm have an incentive to shirk.
• B) Agents seek to maximize their own utilities.
• C) Workers at every level of an organization,including CEOs,are principals.
• D) Incentive mechanisms work by better aligning the interest of workers with the firm's profit-maximizing goals.
• E) Tournaments induce relatively high-effort levels.

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Definitions:

Marginal Tax Rate

The rate of tax applied to the next dollar of taxable income.

Pre-tax Cost

The expense or cost incurred by a corporation before the deduction of tax liabilities.

Pay Interest

The act of compensating lenders or depositors for the use of their money, typically expressed as an annual percentage of the principal.

Face Value

The original value or nominal value of a security as stated by the issuer, often used in the context of bonds or other fixed-income securities.