Question 1

​Sharing contracts in franchising the marginal benefit of the effort

Accepted Answer

A) ​Increases 
B) Decreases 
C) Do not change 
D) ​Eliminates 
A) ​Increases 
B) Decreases 
C) Do not change 
D) ​Eliminates B

Question 2

​Adverse selection is a

Accepted Answer

A) ​Pre-contractual problem 
B) Post contractual problem 
C) Post firing problem 
D) ​None of the above 
A) ​Pre-contractual problem 
B) Post contractual problem 
C) Post firing problem 
D) ​None of the above A

Question 3

​A payday loan company has decided to open several new locations in the city.To decide where to open these locations it hires consultants and pays them per store opened.At the end of the quarter,the company notices a many of the new stores' sales volume fail to meet expectations.This is because

Accepted Answer

A) ​The consultants are paid per store and not just profitable store locations 
B) The consultants are paid per store and hence choose the best locations 
C) The consultants would always choose the best locations 
D) ​None of the above 
A) ​The consultants are paid per store and not just profitable store locations 
B) The consultants are paid per store and hence choose the best locations 
C) The consultants would always choose the best locations 
D) ​None of the above A

Question 4

​If a principle is reducing agency costs by gathering information about the agent's actions,he is most likely trying to solve the problem

Accepted Answer

A) ​Adverse selection 
B) Moral hazard 
C) Both of the above 
D) ​None of the above 
A) ​Adverse selection 
B) Moral hazard 
C) Both of the above 
D) ​None of the above

Question 5

​In a franchising relationship

Accepted Answer

A) ​the franchisor is the local businessman or businesswoman 
B) the corporate brand owner contracting with local operator is the franchisor 
C) the local operators are the franchisors 
D) ​the corporate brand owner contracting with local operators is the franchisee 
A) ​the franchisor is the local businessman or businesswoman 
B) the corporate brand owner contracting with local operator is the franchisor 
C) the local operators are the franchisors 
D) ​the corporate brand owner contracting with local operators is the franchisee

Question 6

​The components of a well-run incentive compensation scheme include all of the following EXCEPT

Accepted Answer

A) ​performing random acts of kindness to employees 
B) avoiding rewards for outcomes that are not included in the performance measures 
C) rewarding workers who for meet performance measures 
D) ​identifying the relevant measures on which to evaluate employees 
A) ​performing random acts of kindness to employees 
B) avoiding rewards for outcomes that are not included in the performance measures 
C) rewarding workers who for meet performance measures 
D) ​identifying the relevant measures on which to evaluate employees

Question 7

​The three central questions for efficient organizational design include all EXCEPT

Accepted Answer

A) ​does the decision maker have the relevant information? 
B) is the decision maker in a supervisory role? 
C) who is making the decision? 
D) ​does the decision maker have an incentive to make a good decision? 
A) ​does the decision maker have the relevant information? 
B) is the decision maker in a supervisory role? 
C) who is making the decision? 
D) ​does the decision maker have an incentive to make a good decision?

Question 8

​Because incentive contracts result in more risk placed on the part of agents

Accepted Answer

A) ​the average level of compensation typically falls 
B) the average level of compensation typically rises 
C) compensation is unaffected 
D) ​employers want employees to insure against wild compensation swings 
A) ​the average level of compensation typically falls 
B) the average level of compensation typically rises 
C) compensation is unaffected 
D) ​employers want employees to insure against wild compensation swings

Question 9

​Information gathering for a moral hazard problem happens

Accepted Answer

A) ​Before the agent is hired 
B) After the agent is hired 
C) After the agent is fired 
D) ​None of the above 
A) ​Before the agent is hired 
B) After the agent is hired 
C) After the agent is fired 
D) ​None of the above

Question 10

​Relative to a fixed franchise fee,sharing contacts in franchising

Accepted Answer

A) ​Can decrease shirking 
B) Can increase shirking 
C) Always decreases shirking 
D) ​None of the above 
A) ​Can decrease shirking 
B) Can increase shirking 
C) Always decreases shirking 
D) ​None of the above

Question 11

​Adopt incentive compensation

Accepted Answer

A) ​Under all circumstances since it is the best solution 
B) Only if it is effective in making the agent work harder 
C) Only if its results exceed its costs 
D) ​Only B&C 
A) ​Under all circumstances since it is the best solution 
B) Only if it is effective in making the agent work harder 
C) Only if its results exceed its costs 
D) ​Only B&C

Question 12

​A franchisee is likely to command_____ earnings than a salaried manager

Accepted Answer

A) ​Higher 
B) Lower 
C) The same 
D) ​None of the above 
A) ​Higher 
B) Lower 
C) The same 
D) ​None of the above

Question 13

​As a result of moving more decision making from the center toward the periphery of the organization,typically

Accepted Answer

A) ​the flow of relevant information to the decision maker should be enhanced 
B) the flow of relevant information from the decision maker should be enhanced 
C) the incentives to make good decisions should be strengthened 
D) ​the incentives to make good decisions should be weakened 
A) ​the flow of relevant information to the decision maker should be enhanced 
B) the flow of relevant information from the decision maker should be enhanced 
C) the incentives to make good decisions should be strengthened 
D) ​the incentives to make good decisions should be weakened

Question 14

​To incentivize employees

Accepted Answer

A) ​Measure performance,whether formally or informally 
B) Tie the performance metrics to compensation 
C) All of the above 
D) ​None of the above 
A) ​Measure performance,whether formally or informally 
B) Tie the performance metrics to compensation 
C) All of the above 
D) ​None of the above

Question 15

​The components of a well-run incentive compensation scheme include all of the following EXCEPT

Accepted Answer

A) ​evaluating the identified performance measures 
B) avoiding rewards for outcomes that are not included in the performance measures 
C) rewarding workers who for meet performance measures 
D) ​displaying the wealth disparities between the executives and the line workers 
A) ​evaluating the identified performance measures 
B) avoiding rewards for outcomes that are not included in the performance measures 
C) rewarding workers who for meet performance measures 
D) ​displaying the wealth disparities between the executives and the line workers

Question 16

​If a car salesman is paid a fixed salary,the owner is most likely to see

Accepted Answer

A) ​A large volume of sales,with large margins 
B) A large volume of sales with no margins 
C) Low to no sales with low margins 
D) ​Low sales but with large margins 
A) ​A large volume of sales,with large margins 
B) A large volume of sales with no margins 
C) Low to no sales with low margins 
D) ​Low sales but with large margins

Question 17

​The components of a well-run incentive compensation scheme include all of the following EXCEPT

Accepted Answer

A) ​evaluating the identified performance measures 
B) avoiding rewards for outcomes that are not included in the performance measures 
C) demonstrating that evaluators can be influenced with small favors 
D) ​identifying the relevant measures on which to evaluate employees 
A) ​evaluating the identified performance measures 
B) avoiding rewards for outcomes that are not included in the performance measures 
C) demonstrating that evaluators can be influenced with small favors 
D) ​identifying the relevant measures on which to evaluate employees

Question 18

​The types of problems in principal-agent relationships typically include

Accepted Answer

A) ​adverse selection - whom to hire 
B) moral hazard - how to motivate workers 
C) uncertainty - how many workers will be needed 
D) ​Both A&B 
A) ​adverse selection - whom to hire 
B) moral hazard - how to motivate workers 
C) uncertainty - how many workers will be needed 
D) ​Both A&B

Question 19

​A firm wants to stop its sales agents from pricing too aggressively to make sales by requiring the agent to obtain a marketing manager's permission to reduce price below a specific threshold.This solution would only work if

Accepted Answer

A) ​The marketing manager has no information about the matter at hand 
B) The marketing manager can only get all the information on the case from the sales agent 
C) Enough unbiased information is transferred to the manager to prevent an unprofitable price reduction 
D) ​All of the above 
A) ​The marketing manager has no information about the matter at hand 
B) The marketing manager can only get all the information on the case from the sales agent 
C) Enough unbiased information is transferred to the manager to prevent an unprofitable price reduction 
D) ​All of the above

Question 20

​In a principal-agent relationship

Accepted Answer

A) ​the principal wants the agent to act on her own behalf 
B) the agent wants the principal to act on his behalf 
C) the principal wants the agent to act on the behalf of others 
D) ​the agent wants the principal to act on the behalf of others 
A) ​the principal wants the agent to act on her own behalf 
B) the agent wants the principal to act on his behalf 
C) the principal wants the agent to act on the behalf of others 
D) ​the agent wants the principal to act on the behalf of others

Exam 19: Getting Employees to Work in the Firms Best Interest

​Sharing contracts in franchising the marginal benefit of the effort

​Adverse selection is a

​A payday loan company has decided to open several new locations in the city.To decide where to open these locations it hires consultants and pays them per store opened.At the end of the quarter,the company notices a many of the new stores' sales volume fail to meet expectations.This is because

​If a principle is reducing agency costs by gathering information about the agent's actions,he is most likely trying to solve the problem

​In a franchising relationship

​The components of a well-run incentive compensation scheme include all of the following EXCEPT

​The three central questions for efficient organizational design include all EXCEPT

​Because incentive contracts result in more risk placed on the part of agents

​Information gathering for a moral hazard problem happens

​Relative to a fixed franchise fee,sharing contacts in franchising

​Adopt incentive compensation

​A franchisee is likely to command_____ earnings than a salaried manager

​As a result of moving more decision making from the center toward the periphery of the organization,typically

​To incentivize employees

​The components of a well-run incentive compensation scheme include all of the following EXCEPT

​If a car salesman is paid a fixed salary,the owner is most likely to see

​The components of a well-run incentive compensation scheme include all of the following EXCEPT

​The types of problems in principal-agent relationships typically include

​A firm wants to stop its sales agents from pricing too aggressively to make sales by requiring the agent to obtain a marketing manager's permission to reduce price below a specific threshold.This solution would only work if

​In a principal-agent relationship

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Sharing contracts in franchising the marginal benefit of the effort

Adverse selection is a

A payday loan company has decided to open several new locations in the city.To decide where to open these locations it hires consultants and pays them per store opened.At the end of the quarter,the company notices a many of the new stores' sales volume fail to meet expectations.This is because

If a principle is reducing agency costs by gathering information about the agent's actions,he is most likely trying to solve the problem

In a franchising relationship

The components of a well-run incentive compensation scheme include all of the following EXCEPT

The three central questions for efficient organizational design include all EXCEPT

Because incentive contracts result in more risk placed on the part of agents

Information gathering for a moral hazard problem happens

Relative to a fixed franchise fee,sharing contacts in franchising

Adopt incentive compensation

A franchisee is likely to command_____ earnings than a salaried manager

As a result of moving more decision making from the center toward the periphery of the organization,typically

To incentivize employees

The components of a well-run incentive compensation scheme include all of the following EXCEPT

If a car salesman is paid a fixed salary,the owner is most likely to see

The components of a well-run incentive compensation scheme include all of the following EXCEPT

The types of problems in principal-agent relationships typically include

A firm wants to stop its sales agents from pricing too aggressively to make sales by requiring the agent to obtain a marketing manager's permission to reduce price below a specific threshold.This solution would only work if

In a principal-agent relationship