Explanation: the Monitoring Problem Arises When Employees' Goals Do Not

Multiple Choice

Explanation: The monitoring problem arises when employees' goals do not match the goals of owners of a firm. Since managers can influence the level of their pay, a monitoring problem can result in firms giving exorbitant pay to managers.
Difficulty: 2 Medium
Topic: Incentives and Monitoring Costs
Learning Objective: 16-02 Discuss why competition should be seen as a process, not a state.
Bloom's: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
-The fact that U.S. managers' salaries are substantially higher than the salaries of comparable managers in Japan may be related to the fact that:

A) the demand for CEOs has decreased.
B) the supply of CEOs has decreased.
C) there are no government controls on CEOs' earnings in the United States.
D) there are more natural monopolies in the United States.