Why do corporate boards of directors sometimes link top managers' compensation to the corporations' stock prices? How might tying compensation too closely to stock prices create an incentive for corporate fraud
What will be an ideal response?
Corporate boards of directors sometimes link top managers' compensation to the corporations' stock price to lessen the principal-agent problem caused by the separation of ownership from control. Linking compensation to stock prices provides managers with an additional incentive to maximize shareholder profits. But tying compensation too closely to stock prices can cause management to maximize short-run profits over long-run profits and to commit corporate fraud to make the firm appear to be more profitable than it is with the intention of increasing the firm's stock price.
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Refer to the figure above. When the demand curve for flash drives is D and the supply curve of flash drives is S1, what is the surplus in the market if the price is $7?
A) 10 units B) 20 units C) 50 units D) 60 units
Refer to Table 4.2. If you choose to invest in Japanese bonds, your investment return from Scenario C will be
A) -3%. B) -1%. C) 2%. D) 5%.
A company X is unlikely to disclose its organizational chart to its competitor company Y to prevent leak of important strategic information about itself
Indicate whether the statement is true or false
Perfect competition and monopolistic competition are similar in that firms in both types of market structure will.
A) act as price takers. B) produce a level of output where price equals marginal cost. C) earn zero profit in the long run. D) act as price setters.