Question

At some company, the ceo is rewarded based on total company profit while a brand manager is rewarded based on total sales revenue of the brand. which of the following is likely to be true?

a. whether the brand manager prefers a higher or lower price than the ceo prefers depends on costs.
b. the brand manager will maximize total corporate profit.
c. the brand manager prefers a higher price than the ceo prefers.
d. the brand manager prefers a lower price than the ceo prefers.

Answer 1

The brand manager prefers a higher price than the CEO prefers, as it directly affects their reward based on sales revenue.

Step-by-step explanation:

In this scenario, the CEO is rewarded based on the company's total profit, while the brand manager is rewarded based on the total sales revenue of the brand.

Given this information, it is likely that the brand manager prefers a higher price than the CEO prefers. This is because a higher price would result in higher total sales revenue, which is the basis for the brand manager's reward.

On the other hand, the CEO's reward is based on total company profit. To maximize profit, the firm would need to find the optimal balance between price and cost.

This means that the CEO may prefer a lower price if it leads to higher total company profit.

In summary, the brand manager prefers a higher price than the CEO prefers because it directly impacts the sales revenue of the brand, which is the basis for their reward.