Question 1

The most commonly used negative incentive used by firms is:

Accepted Answer

A) temporary layoffs. 
B) dismissal. 
C) unpaid suspensions. 
D) verbal reprimands. 
A) temporary layoffs. 
B) dismissal. 
C) unpaid suspensions. 
D) verbal reprimands.

Question 2

In general, automobile manufacturers produce their own engines but purchase tires from independent suppliers.Why?

Accepted Answer

Engine manufacturing involves

Question 3

The principal-agent problem refers to the fact that the agent's goals

Accepted Answer

A) do not always coincide with those of the principal. 
B) coincide with those of the principal. 
C) do not overlap with those of the principal. 
D) overlap with those of the principal. 
A) do not always coincide with those of the principal. 
B) coincide with those of the principal. 
C) do not overlap with those of the principal. 
D) overlap with those of the principal.

Question 4

Which of the following transactions are likely to result in relationship-specific exchange?
a.Purchasing gasoline for the company car.
b.Hiring an employee to operate a machine that only your company uses.
c.Buying napkins for the company snack bar.
d.Purchasing coal for the factory furnace.
e.Buying electricity.

Accepted Answer

Certainly

Question 5

A positive side of long-term contracts is

Accepted Answer

A) low transaction costs. 
B) a loss of flexibility. 
C) the continual need to re-negotiate the contract. 
D) none of the statements associated with this question are correct. 
A) low transaction costs. 
B) a loss of flexibility. 
C) the continual need to re-negotiate the contract. 
D) none of the statements associated with this question are correct.

Question 6

College Retirement Equities Fund (CREF) is a pension fund that has billions of dollars invested in the stock market.Fund participants recently voted on a proposal that would have placed strict limits on the amount of compensation paid to CREF executives.Why do you think 75 percent of the participants voted against the proposal?

Accepted Answer

To the extent that the compensation paid

Question 7

When the owner runs the business

Accepted Answer

A) he does not bear the full cost of a bad decision. 
B) there is not a principal-agent problem. 
C) he does not receive the full benefit nor the full cost of any decision. 
D) he has only limited liability for the actions of the business. 
A) he does not bear the full cost of a bad decision. 
B) there is not a principal-agent problem. 
C) he does not receive the full benefit nor the full cost of any decision. 
D) he has only limited liability for the actions of the business.

Question 8

In a 1998 press release, Boeing Commercial Airplane Group (BCAG) announced that it was signing a 10-year contract with distributor Thyssen Inc.- a distributor of raw aluminum - valued at approximately $300 million.The contract reflects Boeing's effort to reduce costs and production bottlenecks resulting from supply shortages.The contract specifies prices and guarantees quantities of raw aluminum to be delivered to BCAG's suppliers.If you were the production manager at BCAG, how would you justify the long-term nature of the contact with Thyssen Inc.?

Accepted Answer

A contract permits i

The most commonly used negative incentive used by firms is:

In general, automobile manufacturers produce their own engines but purchase tires from independent suppliers.Why?

The principal-agent problem refers to the fact that the agent's goals

A positive side of long-term contracts is

When the owner runs the business

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

The most commonly used negative incentive used by firms is:

In general, automobile manufacturers produce their own engines but purchase tires from independent suppliers.Why?

The principal-agent problem refers to the fact that the agent's goals

A positive side of long-term contracts is

When the owner runs the business

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