The basic incentive problem is that owners and employees:
A)are both concerned about sales maximization.
B)have fundamentally different objectives.
C)need government assistance to solve differences.
D)generally operate in perfectly competitive markets.

Question

Quizplus · Accepted Answer

The basic incentive problem arises because owners aim to maximize profits, while employees seek higher wages, better working conditions, and job security. These objectives are often in conflict, leading to issues such as shirking, moral hazard, and agency costs. Government assistance may sometimes be necessary to address these issues, but it is not the primary solution to the incentive problem. Perfectly competitive markets do not necessarily eliminate the incentive problem as profit maximization remains the objective of the firm.

The Basic Incentive Problem Is That Owners and Employees