Exam 6: The Organization of the Firm

Which of the following methods might be an efficient way of obtaining inputs when specialized investments are not important?

Which of the following is NOT a solution to the manager-worker principal-agent problem?

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

Suppose a new contracting environment with an economic environment that looks more uncertain is considered.This new contract will result in:

One problem with revenue-based incentive schemes is they do NOT provide an incentive to:

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

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

Sydney Roofers Incorporated recently purchased 100 pounds of standard roofing nails from Lowes,a nationwide hardware and building supplies store.This transaction most likely involves:

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

Which of the following mergers is an example of vertical integration?

Refer to the figure below.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:

A positive side of long-term contracts is:

The principal's goals are NOT in line with the goals of:

A payment plan that induces better worker effort by linking compensation to revenues of the firm is known as:

Spot markets are generally preferable to:

If a manager is not the owner,the manager:

You are the manager of Door-to-Door Vacuum Cleaners,Inc.Each salesperson is paid a base salary plus a percentage of the revenues she or he generates.In addition,each salesperson drives his or her car to and from each sales call and is reimbursed $0.40 per mile driven.On average,each salesperson drives about 150 miles per day and 240 days per year.As manager of Door-to-Door,how might you restructure the compensation of your sales force to enhance your profits? Are there any potential disadvantages of your plan?

Art-R-Us makes hand-painted art reproductions.The owner-manager wishes to hire another artist,and is considering paying a fixed wage plus either (1)a share of the profits from each painting sold or (2)a fixed payment for each piece produced.Which plan would you choose if you were the owner?

Point A in the figure below is:

A potential problem with piece-rate plans is that: