Question 1

Which of the following institutions may result in hold-up?

Accepted Answer

A) vertical integration. 
B) piece rates. 
C) long-term contracts. 
D) spot markets. 
A) vertical integration. 
B) piece rates. 
C) long-term contracts. 
D) spot markets.

Question 2

Point "B" in the above graph is

Accepted Answer

A) efficient since it produces 20 units of output at the lowest possible cost. 
B) efficient since it produces 10 units of output at the lowest possible cost. 
C) inefficient since it produces 20 units of output at a cost greater than the minimum cost. 
D) inefficient since it produces 10 units of output at a cost greater than the minimum cost. 
A) efficient since it produces 20 units of output at the lowest possible cost. 
B) efficient since it produces 10 units of output at the lowest possible cost. 
C) inefficient since it produces 20 units of output at a cost greater than the minimum cost. 
D) inefficient since it produces 10 units of output at a cost greater than the minimum cost.

Question 3

As a manager of the WeDoWell Corporation, you have negotiated with several vendors and are on the verge of signing an eight-year contract with Bolts Enterprises.Under the contract, they would ship to you 2,000 titanium bolts per month at a price of $1,000 per bolt.Your assistant has just brought you an article from a trade publication that indicates another company has developed a new technology that reduces the cost of producing the titanium bolts.How would this information affect the optimal length of your contract with Bolts Enterprises? Explain.

Accepted Answer

The reduction in another supplier's cost

Question 4

Long-term contracts

Accepted Answer

A) increase transaction costs and increase opportunism. 
B) increase transaction costs. 
C) can reduce opportunistic behavior. 
D) reduce transaction costs and increase flexibility. 
A) increase transaction costs and increase opportunism. 
B) increase transaction costs. 
C) can reduce opportunistic behavior. 
D) reduce transaction costs and increase flexibility.

Question 5

Principal-agent problems do not arise between

Accepted Answer

A) stockholders and managers. 
B) managers and workers. 
C) stockholders and workers. 
D) workers and consumers. 
A) stockholders and managers. 
B) managers and workers. 
C) stockholders and workers. 
D) workers and consumers.

Question 6

One way of alleviating opportunism is

Accepted Answer

A) spot exchange. 
B) dedicated assets. 
C) vertical integration. 
D) contracts in complex contracting environments. 
A) spot exchange. 
B) dedicated assets. 
C) vertical integration. 
D) contracts in complex contracting environments.

Question 7

Which of the following payment plans does not give an incentive to a manager to stop shirking?

Accepted Answer

A) Flat salary with additional pay based on profits of the firm. 
B) Pay schedule based solely on profits earned by the firm. 
C) Flat salary regardless of firm profits. 
D) None of the statements associated with this question are correct. 
A) Flat salary with additional pay based on profits of the firm. 
B) Pay schedule based solely on profits earned by the firm. 
C) Flat salary regardless of firm profits. 
D) None of the statements associated with this question are correct.

Question 8

A negative side of a revenue sharing plan is that it:

Accepted Answer

A) Does not induce hard or better work. 
B) It can be costly if revenues are low. 
C) It gives no incentive for workers to minimize costs. 
D) It can be difficult to manage from an accounting standpoint. 
A) Does not induce hard or better work. 
B) It can be costly if revenues are low. 
C) It gives no incentive for workers to minimize costs. 
D) It can be difficult to manage from an accounting standpoint.

Question 9

Which of the following is not an example of a piece rate compensation method?

Accepted Answer

A) Paying typists a fixed amount per page. 
B) Paying sewing machine operators a flat amount per shirt sewn. 
C) Paying a carpenter to install a new back porch. 
D) Paying an assembly line worker per bolt put into car bodies. 
A) Paying typists a fixed amount per page. 
B) Paying sewing machine operators a flat amount per shirt sewn. 
C) Paying a carpenter to install a new back porch. 
D) Paying an assembly line worker per bolt put into car bodies.

Question 10

Which of the following forms of payment is not an incentive plan?

Accepted Answer

A) commission plans for salesmen. 
B) paying waitresses low wages, but allowing them to collect tips. 
C) bonuses for managers that increase with profits. 
D) straight hourly wages for construction workers. 
A) commission plans for salesmen. 
B) paying waitresses low wages, but allowing them to collect tips. 
C) bonuses for managers that increase with profits. 
D) straight hourly wages for construction workers.

Question 11

Which of the following is not an incentive scheme to ensure workers do a good job?

Accepted Answer

A) Paying waitresses low wages, but allowing them to collect tips. 
B) Profit-sharing plans in large companies. 
C) Commission pay schedules for salesmen. 
D) Straight hourly wages for dock workers. 
A) Paying waitresses low wages, but allowing them to collect tips. 
B) Profit-sharing plans in large companies. 
C) Commission pay schedules for salesmen. 
D) Straight hourly wages for dock workers.

Question 12

Suppose compensation is given by W = 450,000 + 220 $\pi$ + 15S, where W = total compensation of the CEO, $\pi$= company profits (in millions) = $300, and S = Sales (in millions) = $500.What percentage of the CEO's total earnings is tied to profits of the firm?

Accepted Answer

A) 6.0%. 
B) 7.9%. 
C) 12.6%. 
D) 43.4%. 
A) 6.0%. 
B) 7.9%. 
C) 12.6%. 
D) 43.4%.

Question 13

Spot exchange typically involves

Accepted Answer

A) no transaction costs. 
B) some transaction costs. 
C) extremely high transaction costs. 
D) long-term contracts. 
A) no transaction costs. 
B) some transaction costs. 
C) extremely high transaction costs. 
D) long-term contracts.

Question 14

When a manager enters the work-place from time to time to monitor workers, he is using:

Accepted Answer

A) a profit sharing plan. 
B) spot checks. 
C) a revenue sharing plan. 
D) a piece rate payment plan. 
A) a profit sharing plan. 
B) spot checks. 
C) a revenue sharing plan. 
D) a piece rate payment plan.

Question 15

An increase in the marginal cost arising from a more complex specialized investment environment will cause the optimal contract length to

Accepted Answer

A) increase. 
B) decrease. 
C) remain constant. 
D) may increase or decrease. 
A) increase. 
B) decrease. 
C) remain constant. 
D) may increase or decrease.

Question 16

In order for spot checks to work

Accepted Answer

A) employees must be monitored continually. 
B) the time of the checks must not be predictable. 
C) all of the statements associated with this question are correct. 
D) none of the statements associated with this question are correct. 
A) employees must be monitored continually. 
B) the time of the checks must not be predictable. 
C) all of the statements associated with this question are correct. 
D) none of the statements associated with this question are correct.

Question 17

Which of the following is NOT an implication of specialized investments that leads to increased transaction costs?

Accepted Answer

A) Costly bargaining. 
B) Opportunism and the "hold-up problem". 
C) Underinvestment in specialized investments. 
D) Incentive contracts. 
A) Costly bargaining. 
B) Opportunism and the "hold-up problem". 
C) Underinvestment in specialized investments. 
D) Incentive contracts.

Question 18

Spot markets are generally preferable to

Accepted Answer

A) long-term contracts. 
B) short-term contracts. 
C) vertical integration. 
D) none of the statements associated with this question are correct. 
A) long-term contracts. 
B) short-term contracts. 
C) vertical integration. 
D) none of the statements associated with this question are correct.

Question 19

Suppose compensation is given by W = 512,000 + 217   + 10.08S, where W = total compensation of the CEO,   = company profits (in millions) = $200, and S = Sales (in millions) = $400.What percentage of the CEO's total earnings are tied to profits of the firm:

Accepted Answer

A) 8.2%. 
B) 10.9%. 
C) 7.8%. 
D) 5.1%. 
A) 8.2%. 
B) 10.9%. 
C) 7.8%. 
D) 5.1%.

Question 20

Which of the following is not a means of avoiding opportunism?

Accepted Answer

A) contracts. 
B) spot exchange. 
C) vertical integration. 
D) long-term contracts. 
A) contracts. 
B) spot exchange. 
C) vertical integration. 
D) long-term contracts.

Which of the following institutions may result in hold-up?

Point "B" in the above graph is

Long-term contracts

Principal-agent problems do not arise between

One way of alleviating opportunism is

Which of the following payment plans does not give an incentive to a manager to stop shirking?

A negative side of a revenue sharing plan is that it:

Which of the following is not an example of a piece rate compensation method?

Which of the following forms of payment is not an incentive plan?

Which of the following is not an incentive scheme to ensure workers do a good job?

Suppose compensation is given by W = 450,000 + 220 $\pi$ + 15S, where W = total compensation of the CEO, $\pi$ = company profits (in millions) = $300, and S = Sales (in millions) = $500.What percentage of the CEO's total earnings is tied to profits of the firm?

Spot exchange typically involves

When a manager enters the work-place from time to time to monitor workers, he is using:

An increase in the marginal cost arising from a more complex specialized investment environment will cause the optimal contract length to

In order for spot checks to work

Which of the following is NOT an implication of specialized investments that leads to increased transaction costs?

Spot markets are generally preferable to

Suppose compensation is given by W = 512,000 + 217 + 10.08S, where W = total compensation of the CEO, = company profits (in millions) = $200, and S = Sales (in millions) = $400.What percentage of the CEO's total earnings are tied to profits of the firm:

Which of the following is not a means of avoiding opportunism?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 6: The Organization of the Firm

Which of the following institutions may result in hold-up?

Point "B" in the above graph is

Long-term contracts

Principal-agent problems do not arise between

One way of alleviating opportunism is

Which of the following payment plans does not give an incentive to a manager to stop shirking?

A negative side of a revenue sharing plan is that it:

Which of the following is not an example of a piece rate compensation method?

Which of the following forms of payment is not an incentive plan?

Which of the following is not an incentive scheme to ensure workers do a good job?

Suppose compensation is given by W = 450,000 + 220 π\piπ + 15S, where W = total compensation of the CEO, π\piπ = company profits (in millions) = $300, and S = Sales (in millions) = $500.What percentage of the CEO's total earnings is tied to profits of the firm?

Spot exchange typically involves

When a manager enters the work-place from time to time to monitor workers, he is using:

An increase in the marginal cost arising from a more complex specialized investment environment will cause the optimal contract length to

In order for spot checks to work

Which of the following is NOT an implication of specialized investments that leads to increased transaction costs?

Spot markets are generally preferable to

Suppose compensation is given by W = 512,000 + 217 + 10.08S, where W = total compensation of the CEO, = company profits (in millions) = $200, and S = Sales (in millions) = $400.What percentage of the CEO's total earnings are tied to profits of the firm:

Which of the following is not a means of avoiding opportunism?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Suppose compensation is given by W = 450,000 + 220 $\pi$ + 15S, where W = total compensation of the CEO, $\pi$ = company profits (in millions) = $300, and S = Sales (in millions) = $500.What percentage of the CEO's total earnings is tied to profits of the firm?