Question 1

Which of the following involves the most risk from the point of view of the employee?

Accepted Answer

A) piece rate. 
B) profit sharing. 
C) hourly wage. 
D) annual salary. 
A) piece rate. 
B) profit sharing. 
C) hourly wage. 
D) annual salary.

Question 2

Suppose that the marginal benefit of writing a contract is $100 and the marginal cost of that contract is $150.Based on this information, the optimal contract length should be

Accepted Answer

A) increased by half. 
B) increased by two-thirds. 
C) decreased. 
D) held constant at the contract length where MB = 100 and MC = 150. 
A) increased by half. 
B) increased by two-thirds. 
C) decreased. 
D) held constant at the contract length where MB = 100 and MC = 150.

Question 3

An example of a job that usually involves a revenue sharing plan would be:

Accepted Answer

A) Waiters and waitresses. 
B) Car salesman. 
C) Insurance agents. 
D) All of the statements associated with this question are correct. 
A) Waiters and waitresses. 
B) Car salesman. 
C) Insurance agents. 
D) All of the statements associated with this question are correct.

Question 4

An incentive for managers to maximize profits is:

Accepted Answer

A) Reputation. 
B) Performance bonuses. 
C) Takeovers. 
D) All of the statements associated with this question are correct. 
A) Reputation. 
B) Performance bonuses. 
C) Takeovers. 
D) All of the statements associated with this question are correct.

Question 5

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.How much will this CEO be compensated?

Accepted Answer

A) $812,431. 
B) $43,400. 
C) $559,432. 
D) $512,000. 
A) $812,431. 
B) $43,400. 
C) $559,432. 
D) $512,000.

Question 6

According to Industry Week, a shoe manufacturer recently had a production run that resulted in 100,000 pairs of defective shoes.Workers on the production line knew the shoes were defective as they were being produced, but did nothing to fix the problem.Do you think a profit sharing plan for workers would mitigate future problems? Explain.

Accepted Answer

Clearly a profit sharing reward scheme w

Question 7

Which type of compensation mechanism works by threats?

Accepted Answer

A) Piece rate. 
B) Spot check. 
C) Revenue sharing. 
D) Profit sharing. 
A) Piece rate. 
B) Spot check. 
C) Revenue sharing. 
D) Profit sharing.

Question 8

It would be undesirable to reduce the executive's compensation if her earnings are due largely to

Accepted Answer

A) a flat fee. 
B) performance. 
C) the owner's demand. 
D) the employee's demand. 
A) a flat fee. 
B) performance. 
C) the owner's demand. 
D) the employee's demand.

Question 9

When relationship-specific exchange occurs in complex contractual environments, the best way to purchase inputs is through

Accepted Answer

A) spot markets. 
B) vertical integration. 
C) short-term agency agreements. 
D) long-term contracts. 
A) spot markets. 
B) vertical integration. 
C) short-term agency agreements. 
D) long-term contracts.

Question 10

Which of the following is an outside incentive that forces managers to put forth maximal effort?

Accepted Answer

A) revenue sharing contracts. 
B) performance bonuses. 
C) threat of takeovers. 
D) flat fees. 
A) revenue sharing contracts. 
B) performance bonuses. 
C) threat of takeovers. 
D) flat fees.

Question 11

A potential problem with paying workers based on a piece-rate is that

Accepted Answer

A) effort cannot be expended engaging in quality control. 
B) effort should not be expended engaging in quality control. 
C) workers will attempt to produce quality at the expense of quantity. 
D) workers will attempt to produce quantity at the expense of quality. 
A) effort cannot be expended engaging in quality control. 
B) effort should not be expended engaging in quality control. 
C) workers will attempt to produce quality at the expense of quantity. 
D) workers will attempt to produce quantity at the expense of quality.

Question 12

Which type of compensation method does not involve a performance bonus?

Accepted Answer

A) Profit sharing. 
B) Revenue sharing. 
C) Piece rate. 
D) None of the statements associated with this question are correct. 
A) Profit sharing. 
B) Revenue sharing. 
C) Piece rate. 
D) None of the statements associated with this question are correct.

Question 13

Discuss the benefits and costs of the following methods of monitoring worker performance.
a.Hidden video cameras in the workplace.
b.Time clocks.
c.Paying workers based on the output they produce.

Accepted Answer

a.The benefits are that it may be effect

Question 14

The presence of substantial specialized investment relative to contracting costs suggests that the optimal input procurement method is

Accepted Answer

A) spot exchange. 
B) vertical integration. 
C) contract. 
D) vertical integration or contract. 
A) spot exchange. 
B) vertical integration. 
C) contract. 
D) vertical integration or contract.

Question 15

The specificity of the asset (or investment) leads to the possibility of

Accepted Answer

A) collusion. 
B) prisoner's dilemma. 
C) opportunism. 
D) none of the statements associated with this question are correct. 
A) collusion. 
B) prisoner's dilemma. 
C) opportunism. 
D) none of the statements associated with this question are correct.

Question 16

A drawback of separating ownership from control by creating a firm is:

Accepted Answer

A) The losses of specialization. 
B) Increased transaction costs. 
C) The principal-agent problem. 
D) Synergies of team production. 
A) The losses of specialization. 
B) Increased transaction costs. 
C) The principal-agent problem. 
D) Synergies of team production.

Question 17

An increase in the likelihood of a dismissal

Accepted Answer

A) raises productivity at an increasing rate. 
B) raises productivity at a decreasing rate. 
C) decreases productivity at a decreasing rate. 
D) decrease productivity at an increasing rate. 
A) raises productivity at an increasing rate. 
B) raises productivity at a decreasing rate. 
C) decreases productivity at a decreasing rate. 
D) decrease productivity at an increasing rate.

Question 18

A firm manager is an agent hired by the

Accepted Answer

A) owner to control the production process. 
B) workers to control the production process. 
C) workers to consult with the owner. 
D) owner to oversee the workers. 
A) owner to control the production process. 
B) workers to control the production process. 
C) workers to consult with the owner. 
D) owner to oversee the workers.

Question 19

The principal's goals are not in line with the goals of

Accepted Answer

A) any other principal. 
B) the agents. 
C) the firms. 
D) the consumers. 
A) any other principal. 
B) the agents. 
C) the firms. 
D) the consumers.

Question 20

The presence of minimal specialized investments relative to contracting costs suggests that the optimal input procurement method is

Accepted Answer

A) spot exchange. 
B) vertical integration. 
C) contract. 
D) vertical integration or contract. 
A) spot exchange. 
B) vertical integration. 
C) contract. 
D) vertical integration or contract.

Which of the following involves the most risk from the point of view of the employee?

Suppose that the marginal benefit of writing a contract is $100 and the marginal cost of that contract is $150.Based on this information, the optimal contract length should be

An example of a job that usually involves a revenue sharing plan would be:

An incentive for managers to maximize profits is:

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.How much will this CEO be compensated?

Which type of compensation mechanism works by threats?

It would be undesirable to reduce the executive's compensation if her earnings are due largely to

When relationship-specific exchange occurs in complex contractual environments, the best way to purchase inputs is through

Which of the following is an outside incentive that forces managers to put forth maximal effort?

A potential problem with paying workers based on a piece-rate is that

Which type of compensation method does not involve a performance bonus?

Discuss the benefits and costs of the following methods of monitoring worker performance. a.Hidden video cameras in the workplace. b.Time clocks. c.Paying workers based on the output they produce.

The presence of substantial specialized investment relative to contracting costs suggests that the optimal input procurement method is

The specificity of the asset (or investment) leads to the possibility of

A drawback of separating ownership from control by creating a firm is:

An increase in the likelihood of a dismissal

A firm manager is an agent hired by the

The principal's goals are not in line with the goals of

The presence of minimal specialized investments relative to contracting costs suggests that the optimal input procurement method is

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

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Exam 6: The Organization of the Firm

Which of the following involves the most risk from the point of view of the employee?

Suppose that the marginal benefit of writing a contract is $100 and the marginal cost of that contract is $150.Based on this information, the optimal contract length should be

An example of a job that usually involves a revenue sharing plan would be:

An incentive for managers to maximize profits is:

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.How much will this CEO be compensated?

Which type of compensation mechanism works by threats?

It would be undesirable to reduce the executive's compensation if her earnings are due largely to

When relationship-specific exchange occurs in complex contractual environments, the best way to purchase inputs is through

Which of the following is an outside incentive that forces managers to put forth maximal effort?

A potential problem with paying workers based on a piece-rate is that

Which type of compensation method does not involve a performance bonus?

Discuss the benefits and costs of the following methods of monitoring worker performance. a.Hidden video cameras in the workplace. b.Time clocks. c.Paying workers based on the output they produce.

The presence of substantial specialized investment relative to contracting costs suggests that the optimal input procurement method is

The specificity of the asset (or investment) leads to the possibility of

A drawback of separating ownership from control by creating a firm is:

An increase in the likelihood of a dismissal

A firm manager is an agent hired by the

The principal's goals are not in line with the goals of

The presence of minimal specialized investments relative to contracting costs suggests that the optimal input procurement method is

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