One argument against using a profit-sharing scheme is the potential for free-riding. In this situation, free-riding refers to
A)one firm using the same contract specifications as another firm.
B)a worker not providing effort because his contribution to profit is very small.
C)a worker not providing effort because he doesn't want his co-workers' wages to increase.
D)the firm not honestly reporting its profits.
E)profits being insensitive to worker effort because all increases in profit are returned to the workers due to the profit-sharing scheme.

Question

Quizplus · Accepted Answer

Free-riding occurs when a worker knows that their effort is not significant enough to actually influence the overall profit and therefore decides not to provide any effort since they will still receive a share of the profit regardless. Profit-sharing schemes can potentially incentivize workers to work harder, but free-riding undermines that incentive.

One Argument Against Using a Profit-Sharing Scheme Is the Potential