Question 1

Shirking can take the form of:

Accepted Answer

A)  long lunch hours. 
B)  sleeping at work. 
C)  leaving work early. 
D)  All of the statements associated with this question are correct. 
A)  long lunch hours. 
B)  sleeping at work. 
C)  leaving work early. 
D)  All of the statements associated with this question are correct.

Question 2

As firms increase in size,they tend to experience a:

Accepted Answer

A)  decrease in the need for managers. 
B)  decrease in transaction costs. 
C)  loss of opportunity cost. 
D)  None of the answers are correct. 
A)  decrease in the need for managers. 
B)  decrease in transaction costs. 
C)  loss of opportunity cost. 
D)  None of the answers are correct.

Question 3

The problem with spot exchange in the presence of specific assets is that both parties:

Accepted Answer

A)  have incentives to behave as principals. 
B)  have incentives to behave opportunistically. 
C)  take the risk of price fluctuations. 
D)  do not take advantage of the economies of scope. 
A)  have incentives to behave as principals. 
B)  have incentives to behave opportunistically. 
C)  take the risk of price fluctuations. 
D)  do not take advantage of the economies of scope.

Question 4

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 5

Suppose a new contracting environment that requires clearing fewer legal hurdles is considered.This new contract will result in:

Accepted Answer

A)  an increase in the marginal cost and a longer optimal contract. 
B)  an increase in the marginal cost and a shorter optimal contract. 
C)  a decrease in the marginal cost and a longer optimal contract. 
D)  a decrease in the marginal cost and a shorter optimal contract. 
A)  an increase in the marginal cost and a longer optimal contract. 
B)  an increase in the marginal cost and a shorter optimal contract. 
C)  a decrease in the marginal cost and a longer optimal contract. 
D)  a decrease in the marginal cost and a shorter optimal contract.

Question 6

Which of the following is NOT a benefit associated with producing inputs within a firm?

Accepted Answer

A)  Reduction in transaction costs. 
B)  Gains of specializing. 
C)  Reductions in opportunism. 
D)  Mitigation of hold-up problem. 
A)  Reduction in transaction costs. 
B)  Gains of specializing. 
C)  Reductions in opportunism. 
D)  Mitigation of hold-up problem.

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

Suppose compensation is given by W = 512,000 + 217π + 10.08S,where W = total compensation of the CEO,π = 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 9

If a firm manager has a base salary of $100,000 and also receives 5 percent of all profits,what percentage of his/her final income will be from a profit-sharing plan when profit equals $1,500,000?

Accepted Answer

A)  51 percent 
B)  27 percent 
C)  43 percent 
D)  48 percent 
A)  51 percent 
B)  27 percent 
C)  43 percent 
D)  48 percent

Question 10

A firm chooses the institution to purchase inputs:

Accepted Answer

A)  which minimizes the transactions costs of obtaining inputs. 
B)  in order to create more divisions. 
C)  which minimizes worker shirking. 
D)  to implement profit sharing. 
A)  which minimizes the transactions costs of obtaining inputs. 
B)  in order to create more divisions. 
C)  which minimizes worker shirking. 
D)  to implement profit sharing.

Question 11

Long-term contracts become shorter:

Accepted Answer

A)  when specialized investment becomes less important. 
B)  when the exchange environment is less complex. 
C)  when spot markets work poorly. 
D)  when marginal costs are increasing. 
A)  when specialized investment becomes less important. 
B)  when the exchange environment is less complex. 
C)  when spot markets work poorly. 
D)  when marginal costs are increasing.

Question 12

Vertical integration:

Accepted Answer

A)  occurs when a firm purchases its inputs in a market. 
B)  is attractive when relationship-specific exchange is unimportant. 
C)  occurs when a firm produces its own inputs. 
D)  is a spot exchange phenomenon. 
A)  occurs when a firm purchases its inputs in a market. 
B)  is attractive when relationship-specific exchange is unimportant. 
C)  occurs when a firm produces its own inputs. 
D)  is a spot exchange phenomenon.

Question 13

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 14

A person who monitors the production process and evaluates the productivity of workers is:

Accepted Answer

A)  a manager. 
B)  an employee. 
C)  a shareholder. 
D)  a self-proprietor. 
A)  a manager. 
B)  an employee. 
C)  a shareholder. 
D)  a self-proprietor.

Question 15

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 16

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 17

Often owners of firms who hire managers must install incentive or bonus plans to ensure that the:

Accepted Answer

A)  company is financially secure. 
B)  manager will work hard. 
C)  manager will maintain employee morale. 
D)  company will have positive economic profits. 
A)  company is financially secure. 
B)  manager will work hard. 
C)  manager will maintain employee morale. 
D)  company will have positive economic profits.

Question 18

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?

Accepted Answer

The reduction in another supplier's cost

Question 19

Long-term contracts become longer:

Accepted Answer

A)  when specialized investment becomes more important. 
B)  when the exchange environment is more complex. 
C)  when spot markets work well. 
D)  when marginal costs are declining. 
A)  when specialized investment becomes more important. 
B)  when the exchange environment is more complex. 
C)  when spot markets work well. 
D)  when marginal costs are declining.

Question 20

Solving the principal-agent problem ensures that the firm is operating:

Accepted Answer

A)  on the production function. 
B)  above the production function. 
C)  below the production function. 
D)  above the isoquant curve. 
A)  on the production function. 
B)  above the production function. 
C)  below the production function. 
D)  above the isoquant curve.

Shirking can take the form of:

As firms increase in size,they tend to experience a:

The problem with spot exchange in the presence of specific assets is that both parties:

Spot exchange typically involves:

Suppose a new contracting environment that requires clearing fewer legal hurdles is considered.This new contract will result in:

Which of the following is NOT a benefit associated with producing inputs within a firm?

When the owner runs the business:

Suppose compensation is given by W = 512,000 + 217π + 10.08S,where W = total compensation of the CEO,π = company profits (in millions)= $200,and S = sales (in millions)= $400.How much will this CEO be compensated?

If a firm manager has a base salary of $100,000 and also receives 5 percent of all profits,what percentage of his/her final income will be from a profit-sharing plan when profit equals $1,500,000?

A firm chooses the institution to purchase inputs:

Long-term contracts become shorter:

Vertical integration:

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

A person who monitors the production process and evaluates the productivity of workers is:

Which type of compensation mechanism works by threats?

The most commonly used negative incentive used by firms is:

Often owners of firms who hire managers must install incentive or bonus plans to ensure that the:

Long-term contracts become longer:

Solving the principal-agent problem ensures that the firm is operating:

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

Shirking can take the form of:

As firms increase in size,they tend to experience a:

The problem with spot exchange in the presence of specific assets is that both parties:

Spot exchange typically involves:

Suppose a new contracting environment that requires clearing fewer legal hurdles is considered.This new contract will result in:

Which of the following is NOT a benefit associated with producing inputs within a firm?

When the owner runs the business:

Suppose compensation is given by W = 512,000 + 217π + 10.08S,where W = total compensation of the CEO,π = company profits (in millions)= $200,and S = sales (in millions)= $400.How much will this CEO be compensated?

If a firm manager has a base salary of $100,000 and also receives 5 percent of all profits,what percentage of his/her final income will be from a profit-sharing plan when profit equals $1,500,000?

A firm chooses the institution to purchase inputs:

Long-term contracts become shorter:

Vertical integration:

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

A person who monitors the production process and evaluates the productivity of workers is:

Which type of compensation mechanism works by threats?

The most commonly used negative incentive used by firms is:

Often owners of firms who hire managers must install incentive or bonus plans to ensure that the:

Long-term contracts become longer:

Solving the principal-agent problem ensures that the firm is operating:

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