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Author Question: People often complain bitterly when they learn that CEOs of non-profit companies like the United Way ... (Read 24 times)

tatyanajohnson

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on: Jun 29, 2018
People often complain bitterly when they learn that CEOs of non-profit companies like the United Way or the Red Cross earn salaries commensurate to what could be earned in by CEOs employed by for-profit companies? Is this complaint valid? Explain.
 
  What will be an ideal response?

Question 2

What happens when a firm encounters diminishing returns? What causes diminishing returns?
 
  What will be an ideal response?


emily12345

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Reply #1 on: Jun 29, 2018
Answer to Question 1

When non-profit companies are looking for CEOs they often have to look for them in both the ranks of the non-profits and profit-making firms as well. In order to be competitive their offers often must be in line with what they can earn elsewhere. In other words, they have to be paid their opportunity cost.

Answer to Question 2

The firm encounters diminishing returns when the marginal product of variable inputs declines. This occurs because other inputs are unchanged in the short run.


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