Incomplete question. The remaining part reads;
"When this same manager is given an annual, fixed salary of $110,000 and 3 percent of the firm's profits—amounting to a total salary of $155,000 per year—the manager chooses to work 8 hours and shirks for 2 hours. Given this information, which of the compensation schemes does the manager prefer?"
Answer:
The scheme with a fixed payment of $110,000 and a percentage of profits.
Explanation:
It can be observed that the scheme with a fixed payment of $110,000 and a percentage of profits lead to a reduction of working hours by the manager.
However, to show that he [the manager] prefers the later compensation, we are told that he "shirks for 2 hours."
