ECON 101 2Midtermreview

The atc curve is u shaped for the same reasons in

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Unformatted text preview: agent problem are Ownership Incentive pay Long- term contracts Ownership, often offered to managers, gives the managers an incentive to maximize the firm’s profits, which is the goal of the owners, the principals. Incentive pay links managers’ or workers’ pay to the firm’s performance and helps align the managers’ and workers’ interests with those of the owners, the principals. Long- term contracts can tie managers’ or workers’ long- term rewards to the long- term performance of the firm. This arrangement encourages the agents work in the best long- term interests of the firm owners, the principals. Types of Business Organization There are three types of business organization: Sole proprietorship Partnership Corporation Sole Proprietorship A sole proprietorship is a firm with a...
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