Question 1

If used properly, piece rates can greatly increase productivity.

Accepted Answer

A) True 
 B)False

Question 2

IBM paid programmers by the number of lines of code written, which resulted in:

Accepted Answer

A)  too many lines of poor-quality code. 
B)  primarily high-quality code. 
C)  increased profits. 
D)  increased sales revenue. 
A)  too many lines of poor-quality code. 
B)  primarily high-quality code. 
C)  increased profits. 
D)  increased sales revenue.

Question 3

Paying pizza makers for how many pizzas they make is an example of a piece rate system.

Accepted Answer

A) True 
 B)False

Question 4

What proportion of U.S. corporations evaluate employees based on relative performance?

Accepted Answer

A)  more than half 
B)  almost all 
C)  about one-third 
D)  less than one-quarter 
A)  more than half 
B)  almost all 
C)  about one-third 
D)  less than one-quarter

Question 5

The minimum wage is a type of piece rate.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is an example of tournament pay?

Accepted Answer

A)  giving a bonus to the sales agent with the highest sales 
B)  giving a bonus to sales agents based on the gross amount of their sales 
C)  giving a bonus to the sales agent with the most hours of working 
D)  giving a bonus to sales agents based on the hours of overtime work 
A)  giving a bonus to the sales agent with the highest sales 
B)  giving a bonus to sales agents based on the gross amount of their sales 
C)  giving a bonus to the sales agent with the most hours of working 
D)  giving a bonus to sales agents based on the hours of overtime work

Question 7

Voters, politicians, and parents have no need to think about and choose incentives.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is NOT a lesson about incentives?

Accepted Answer

A)  You get what you pay for. 
B)  Incentives interfere with tournaments. 
C)  Tie pay to performance to reduce risk. 
D)  Money isn't everything. 
A)  You get what you pay for. 
B)  Incentives interfere with tournaments. 
C)  Tie pay to performance to reduce risk. 
D)  Money isn't everything.

Question 9

"Employee of the month" plaques in fast-food restaurants recognize the lesson that when designing incentive schemes:

Accepted Answer

A)  you get what you pay for. 
B)  money isn't everything. 
C)  fast-food places always pay the minimum wage. 
D)  pay does not need to be tied to performance. 
A)  you get what you pay for. 
B)  money isn't everything. 
C)  fast-food places always pay the minimum wage. 
D)  pay does not need to be tied to performance.

Question 10

Paying sales staff bonuses based on the agents with the highest, second-highest, and third-highest sales is called a:

Accepted Answer

A)  strict ranking game. 
B)  players event. 
C)  tournament. 
D)  horse race scheme. 
A)  strict ranking game. 
B)  players event. 
C)  tournament. 
D)  horse race scheme.

Question 11

Ability risk can be described as the risk that:

Accepted Answer

A)  external factors such as customer preferences, the economy, or product quality will affect sales. 
B)  some members of a sales force will have a higher ability than others. 
C)  agents may appear to be high ability when they are actually low ability. 
D)  tournament pay may hide the true ability of some agents. 
A)  external factors such as customer preferences, the economy, or product quality will affect sales. 
B)  some members of a sales force will have a higher ability than others. 
C)  agents may appear to be high ability when they are actually low ability. 
D)  tournament pay may hide the true ability of some agents.

Question 12

Which of the following classroom situations will generate the most study effort by students?

Accepted Answer

A)  a bad teacher who doesn't grade on a curve 
B)  a bad teacher grading on a curve 
C)  a bad teacher grading on a curve and lots of ability risk among students 
D)  a bad teacher who doesn't grade on a curve with lots of ability risk among students 
A)  a bad teacher who doesn't grade on a curve 
B)  a bad teacher grading on a curve 
C)  a bad teacher grading on a curve and lots of ability risk among students 
D)  a bad teacher who doesn't grade on a curve with lots of ability risk among students

Question 13

Planning where, when, and how choices are made is sometimes called "choice architecture." Give an example of this.

Accepted Answer

Some employers now put more healthful fo

Question 14

Automaker Henry Ford famously paid high wages to his workers. In 1914, he offered $5 a day (about $107 today) for assembly line work.. The offer resulted in long lines for Ford jobs, little worker turnover, and high-quality workers. Paying above-market wages may improve profits better than piece rate incentives if:

Accepted Answer

A)  supported by intrinsic motivation. 
B)  product quality is not a concern. 
C)  environmental risks are not a factor. 
D)  worker effort is easily observable. 
A)  supported by intrinsic motivation. 
B)  product quality is not a concern. 
C)  environmental risks are not a factor. 
D)  worker effort is easily observable.

Question 15

When constructing an incentive scheme:

Accepted Answer

A)  stronger incentives are always better. 
B)  weaker incentives never result in a strong outcome. 
C)  weaker incentives might be better if monitoring is difficult. 
D)  stronger incentives typically work better in a corporate setting. 
A)  stronger incentives are always better. 
B)  weaker incentives never result in a strong outcome. 
C)  weaker incentives might be better if monitoring is difficult. 
D)  stronger incentives typically work better in a corporate setting.

Question 16

Firms with at least one large shareholder ______ pay executives based on absolute stock performance.

Accepted Answer

A)  are less likely to 
B)  are more likely to 
C)  are equally likely to 
D)  do not 
A)  are less likely to 
B)  are more likely to 
C)  are equally likely to 
D)  do not

Question 17

When IBM paid programmers per line of code, IBM programmers produced:

Accepted Answer

A)  small amounts of low-quality code. 
B)  small amounts of high-quality code. 
C)  large amounts of low-quality code. 
D)  large amounts of high-quality code. 
A)  small amounts of low-quality code. 
B)  small amounts of high-quality code. 
C)  large amounts of low-quality code. 
D)  large amounts of high-quality code.

Question 18

Strong incentives:

Accepted Answer

A)  will always lead to cheating. 
B)  will typically be less effective than weak incentives since they always give the incentive to cheat. 
C)  might still be a good idea, even if they encourage cheating. 
D)  are only a good idea if the possibility of cheating can be eliminated. 
A)  will always lead to cheating. 
B)  will typically be less effective than weak incentives since they always give the incentive to cheat. 
C)  might still be a good idea, even if they encourage cheating. 
D)  are only a good idea if the possibility of cheating can be eliminated.

Question 19

When the owner of a firm sells "recession insurance" to her employees, it means that the:

Accepted Answer

A)  employees sacrifice larger bonuses during good economic times in return for higher salaries during bad economic times. 
B)  owner of the firm earns higher profits during bad economic times by skimming off the workers' salaries. 
C)  employees are not allowed to quit the firm for higher pay during good economic times. 
D)  employees are not allowed to quit the firm during bad economic times. 
A)  employees sacrifice larger bonuses during good economic times in return for higher salaries during bad economic times. 
B)  owner of the firm earns higher profits during bad economic times by skimming off the workers' salaries. 
C)  employees are not allowed to quit the firm for higher pay during good economic times. 
D)  employees are not allowed to quit the firm during bad economic times.

Question 20

What is the difference between intrinsic and extrinsic motivation?

Accepted Answer

Intrinsic motivation has to do

Exam 22: Managing Incentives

If used properly, piece rates can greatly increase productivity.

IBM paid programmers by the number of lines of code written, which resulted in:

Paying pizza makers for how many pizzas they make is an example of a piece rate system.

What proportion of U.S. corporations evaluate employees based on relative performance?

The minimum wage is a type of piece rate.

Which of the following is an example of tournament pay?

Voters, politicians, and parents have no need to think about and choose incentives.

Which of the following is NOT a lesson about incentives?

"Employee of the month" plaques in fast-food restaurants recognize the lesson that when designing incentive schemes:

Paying sales staff bonuses based on the agents with the highest, second-highest, and third-highest sales is called a:

Ability risk can be described as the risk that:

Which of the following classroom situations will generate the most study effort by students?

Planning where, when, and how choices are made is sometimes called "choice architecture." Give an example of this.

When constructing an incentive scheme:

Firms with at least one large shareholder ______ pay executives based on absolute stock performance.

When IBM paid programmers per line of code, IBM programmers produced:

Strong incentives:

When the owner of a firm sells "recession insurance" to her employees, it means that the:

What is the difference between intrinsic and extrinsic motivation?

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters