Describe how a manager who derives satisfaction from both income and shirking allocates a 10-hour day between these activities when paid an annual, fixed salary of $130,000.
Time spent working: ___hours
Time spent shirking: ___hours
When this same manager is given an annual, fixed salary of $130,000 and 4 percent of the firm's profits-amounting to a total salary of $160,000 per year-the manager chooses to work 7 hours and shirks for 3 hours. Given this information, which of the compensation schemes does the manager prefer?
a. The scheme with fixed payment of $130,000 and a percentage of profits.
b. The manager is indifferent between the two payment schemes.
c. The scheme with only a fixed payment of $130,000.