Question 1

Time clocks are typically a solution to the:

Accepted Answer

A)  manager-consumer, principal-agent problem. 
B)  manager-owner, principal-agent problem. 
C)  consumer-worker, principal-agent problem. 
D)  None of the preceding statements is correct. 
A)  manager-consumer, principal-agent problem. 
B)  manager-owner, principal-agent problem. 
C)  consumer-worker, principal-agent problem. 
D)  None of the preceding statements is correct.

Question 2

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

Accepted Answer

A)  Incentive contracts 
B)  Performance bonuses 
C)  Flat fees 
D)  Reputation 
A)  Incentive contracts 
B)  Performance bonuses 
C)  Flat fees 
D)  Reputation

Question 3

Spot exchange can be inefficient in the presence of:

Accepted Answer

A)  opportunism. 
B)  a complex contracting environment. 
C)  spot checks. 
D)  None of the statements is correct. 
A)  opportunism. 
B)  a complex contracting environment. 
C)  spot checks. 
D)  None of the statements is correct.

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

The disadvantage of vertical integration is that:

Accepted Answer

A)  relationship-specific exchange may cause hold-up. 
B)  long-term contracts may be inflexible. 
C)  the principal-agent problem causes shirking. 
D)  firms no longer specialize in what they do best. 
A)  relationship-specific exchange may cause hold-up. 
B)  long-term contracts may be inflexible. 
C)  the principal-agent problem causes shirking. 
D)  firms no longer specialize in what they do best.

Question 6

Spot markets are an INEFFICIENT way for the firm to purchase inputs if:

Accepted Answer

A)  opportunism is a problem. 
B)  suppliers engage in hold-up. 
C)  profit sharing is used to compensate managers. 
D)  opportunism is a problem and suppliers engage in hold-up. 
A)  opportunism is a problem. 
B)  suppliers engage in hold-up. 
C)  profit sharing is used to compensate managers. 
D)  opportunism is a problem and suppliers engage in hold-up.

Question 7

Revenue sharing tries to induce worker effort by linking:

Accepted Answer

A)  worker compensation to profits. 
B)  worker compensation to revenues. 
C)  worker output to profits. 
D)  worker output to revenues. 
A)  worker compensation to profits. 
B)  worker compensation to revenues. 
C)  worker output to profits. 
D)  worker output to revenues.

Question 8

At the recent shareholders' meeting,the CEO of a small bank proposed a plan to offer each of its employees 250 incentive options for Class A common stock.The key provisions of the plan are that employees must exercise the options between January 2014 and December 2019,and if an employee terminates his or her employment with the bank (or is terminated),the options are no longer exercisable.One shareholder feverishly objected to the plan,claiming that such a move would dilute the value of the outstanding shares.As CEO,how would you defend the stock option plan to the shareholders?

Accepted Answer

The first important point to make with t

Question 9

Piece rates are typically a solution to the:

Accepted Answer

A)  manager-worker, principal-agent problem. 
B)  manager-owner, principal-agent problem. 
C)  owner-worker, principal-agent problem. 
D)  None of the preceding statements is correct. 
A)  manager-worker, principal-agent problem. 
B)  manager-owner, principal-agent problem. 
C)  owner-worker, principal-agent problem. 
D)  None of the preceding statements is correct.

Question 10

Spot markets are an efficient way for the firm to purchase inputs if:

Accepted Answer

A)  opportunism is not a problem. 
B)  suppliers engage in hold-up. 
C)  profit sharing is used to compensate managers. 
D)  the supplier needs specialized investment to produce the input. 
A)  opportunism is not a problem. 
B)  suppliers engage in hold-up. 
C)  profit sharing is used to compensate managers. 
D)  the supplier needs specialized investment to produce the input.

Question 11

A decrease in the marginal cost arising from a less complex specialized investment environment will cause the optimal contract length to:

Accepted Answer

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

Question 12

If we reduce performance-based rewards to CEOs,the profits of firms will:

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain constant. 
D)  None of the answers are correct. 
A)  rise. 
B)  fall. 
C)  remain constant. 
D)  None of the answers are correct.

Question 13

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 14

Suppose a new contracting environment that requires less specialized investments is considered.This new contract will result in:

Accepted Answer

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

Question 15

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 16

A potential problem with piece-rate plans is that:

Accepted Answer

A)  workers will have a tendency to under-produce the good. 
B)  workers have no incentive to work hard. 
C)  workers may put little emphasis on the quality of the good. 
D)  it is difficult for managers to enforce. 
A)  workers will have a tendency to under-produce the good. 
B)  workers have no incentive to work hard. 
C)  workers may put little emphasis on the quality of the good. 
D)  it is difficult for managers to enforce.

Question 17

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

Time clocks are typically a solution to the:

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

Spot exchange can be inefficient in the presence of:

Long-term contracts:

The disadvantage of vertical integration is that:

Spot markets are an INEFFICIENT way for the firm to purchase inputs if:

Revenue sharing tries to induce worker effort by linking:

Piece rates are typically a solution to the:

Spot markets are an efficient way for the firm to purchase inputs if:

A decrease in the marginal cost arising from a less complex specialized investment environment will cause the optimal contract length to:

If we reduce performance-based rewards to CEOs,the profits of firms will:

Principal-agent problems do NOT arise between:

Suppose a new contracting environment that requires less specialized investments is considered.This new contract will result in:

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

A potential problem with piece-rate plans is that:

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

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

Time clocks are typically a solution to the:

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

Spot exchange can be inefficient in the presence of:

Long-term contracts:

The disadvantage of vertical integration is that:

Spot markets are an INEFFICIENT way for the firm to purchase inputs if:

Revenue sharing tries to induce worker effort by linking:

Piece rates are typically a solution to the:

Spot markets are an efficient way for the firm to purchase inputs if:

A decrease in the marginal cost arising from a less complex specialized investment environment will cause the optimal contract length to:

If we reduce performance-based rewards to CEOs,the profits of firms will:

Principal-agent problems do NOT arise between:

Suppose a new contracting environment that requires less specialized investments is considered.This new contract will result in:

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

A potential problem with piece-rate plans is that:

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

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