# Question

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 $ 100,000. When this same manager is given an annual, fixed salary of $ 100,000 and 4 percent of the firm’s profits— amounting to $ 130,000 per year— the manager chooses to work eight hours and shirks for two hours. Explain which of the compensation schemes the manager prefers.

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