Unformatted text preview: compensation is perhaps more important to your well-being than the dollar amount of that compensation. 4. a. Why do you think authors are paid royalties for writing books? b. Are there any disadvantages associated with this type of compensation scheme? 5. A manager is paid $100 per day as a base salary, plus he receives 5 percent of the firm’s profits. For every hour he spends managing during an 8-hour day, the firm earns $1000 in profits. Graph the manager’s opportunity set, and show the situation where he works 7 hours per day, in equilibrium. Also indicate his daily earnings in your graph....
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- Winter '11
- Economics, optimal contract length