Exam 6: The Organization of the Firm

Explain why people in the following occupations are compensated as they are. a. Insurance agents b. Football players c. Authors d. CEOs of major corporations e. Food servers

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

A negative side of long-term contracts is:

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

An increase in the likelihood of a dismissal:

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

A firm chooses the institution to purchase inputs:

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:

A manager derives satisfaction from income and leisure on the job (shirking). a. If the manager is paid a fixed salary of $100,000, how much leisure will she consume on the job during an eight-hour day? Explain. b. When the manager is given a salary of $100,000 plus 10 percent of the firm's profits, she chooses to spend six hours managing and two hours consuming leisure. Salary and bonus total $120,000. Does the manager necessarily prefer this situation to the situation in part (a)?

Explain how each of the following affects the optimal method of acquiring an input. a. A complex contracting environment b. A specialized investment c. Opportunism d. Bargaining costs e. The costs of bureaucracy f. Gains from specialization

An agent hired by the owner of productive resources to control the production process is:

The most likely effect of reducing performance-based rewards for the CEOs of corporations would be:

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

Spot exchange can be inefficient in the presence of:

Suppose a firm manager has a base salary of $75,000 and earns 1.5 percent of all profits. Determine the manager's income, if revenues are $10,000,000 and profits are $5,000,000.

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

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

Jiffyburger, a fast-food outlet, sells approximately 8,000 quarter-pound hamburgers in a given week. To meet that demand, Jiffyburger needs 2,000 pounds of ground beef delivered to its premises every Monday morning by 8:00 A.M. sharp. If you were the manager of a Jiffyburger franchise, how would you acquire the ground beef? Explain.

The LEAST risky payment plan from the viewpoint of the worker is:

The activity known as shirking is LEAST likely to occur when: