Exam 10: Organizing Production

Much of the outcry in the 2008 fight over a fat bailout for Wall Street focused on the size of Wall Street's fat paychecks. The real problem, according to corporate governance researchers, isn't the amount executives receive, it's how companies pay them. Most companies link compensation to quarterly performance, encouraging short-term gambles. One way to align pay with long-term incentives and discourage risky bets would be to stretch compensation over more years. What is a suggested solution to the principal-agent problem?

Kris wants to purchase a house. She buys newspapers to read the classified advertisements and spends her evenings with realtors looking at houses. Kris has incurred the ________ costs of making a purchase.

A firm's goal is to maximize normal profit.

Which of the following compensation schemes can be explained as an attempt to solve a principal-agent problem?

-The table above shows sales of the firms in the chocolate industry. The four-firm concentration ratio in the industry is

Which of the following are two components of the opportunity cost of using capital already owned by the firm?

In their calculation, concentration ratios take barriers to entry into a market into consideration.

The Herfindahl-Hirschman Index is definitely larger in a ________ market than in a ________ market.

Techniques that produce 100 sweaters -Using the data in the above table, if the price of an hour of labor is $20 and the price of a unit of capital is $10, then the most economically efficient technique for producing 100 sweaters is

Which of the following forms of business organization is likely to suffer most from the principal agent problem between the owners and managers of the business?

In September 2008, Toyota Motor's share of the U.S. auto sales market was 15 percent, Ford's market share was 12.1 percent, GM's was 29.1 percent, Honda's was 10 percent, Nissan's share was 6.2 percent, and Chrysler's market share was 11.1 percent. What is the four-firm concentration ratio in the auto market?

Even though the market for bricks has a low concentration ratio nationally, the U.S. Justice Department might still scrutinize any mergers in this industry because the

-The table above shows four methods for producing 10 computer desks a day. If the cost of a worker is $100 a day and the cost of capital is $100 a day, the method that is economically efficient is

Economies of scope are cost reductions achieved by

The principal-agent problem is the issue of inducing

Firms organize production by using a mixture of two systems: (1) command systems and (2) incentive systems.

The Herfindahl-Hirschman Index measures an industry's concentration of

-The table above shows four methods for producing 10 computer desks a day. Of the four methods, ________ technologically inefficient.

It was more than a century ago that an engineer named Frederick Taylor walked into factories and starting timing workers with a stop watch. He dissected their movements, and organized them more efficiently. He turned factory production into a science. Suppose work was completed in the factory based on what the floor manager decided and workers were paid a base daily wage plus a bonus when they produced more than expected. How does this firm organize production?

In a corporation, the managers are the stockholders'