Question 1

What term best describes how a firm performs based on a comparison to another firm in its peer set within an industry?

Accepted Answer

A) Absolute performance 
B) Comparative performance 
C) Proportional performance 
D) Performance measurement 
E) Relative performance 
A) Absolute performance 
B) Comparative performance 
C) Proportional performance 
D) Performance measurement 
E) Relative performance

Question 2

What is a benefit of the de-centralized organization coordination solution?

Accepted Answer

A) Ensures no coordination opportunities are missed 
B) Makes the organization more hierarchical 
C) Takes advantage of localized information 
D) Improves communication 
E) Always encourages collaboration 
A) Ensures no coordination opportunities are missed 
B) Makes the organization more hierarchical 
C) Takes advantage of localized information 
D) Improves communication 
E) Always encourages collaboration

Question 3

Which of the following is not a characteristic of performance based pay?

Accepted Answer

A) The slope of the relationship between pay and performance for an employee provides incentives for effort,not the level of pay 
B) Employees will always prefer performance based pay thus aligning principal/agent objectives 
C) The overall value maximizing effort level for an employee occurs when personal marginal benefit equals personal marginal cost 
D) Performance based pay can resolve hidden information problems 
E) Pay contracts approaching 100% commission and negative salaries can occur 
A) The slope of the relationship between pay and performance for an employee provides incentives for effort,not the level of pay 
B) Employees will always prefer performance based pay thus aligning principal/agent objectives 
C) The overall value maximizing effort level for an employee occurs when personal marginal benefit equals personal marginal cost 
D) Performance based pay can resolve hidden information problems 
E) Pay contracts approaching 100% commission and negative salaries can occur

Question 4

Herding is best described by which of the following??

Accepted Answer

A) The value of the compensation depends on the measured performance of the employee? 
B) Supervisors giving all their subordinates average (or above average)grading to avoid making sharp distinctions between those subordinates when evaluating them 
C) A wage payment is made to an agent that exceeds his opportunity cost of working and discourages the agent from shirking 
D) Individuals ignore their own information about the best course of action and instead simply do what everyone else is doing 
E) None of the above 
A) The value of the compensation depends on the measured performance of the employee? 
B) Supervisors giving all their subordinates average (or above average)grading to avoid making sharp distinctions between those subordinates when evaluating them 
C) A wage payment is made to an agent that exceeds his opportunity cost of working and discourages the agent from shirking 
D) Individuals ignore their own information about the best course of action and instead simply do what everyone else is doing 
E) None of the above

Question 5

How does a centralized organization solve coordination problems?

Accepted Answer

A) Allows for face to face communication 
B) Creates a smaller organization 
C) Reduces the costs of business 
D) Concentrates decision making authority in a one or a small group of people 
E) Information can take more time to trickle down 
A) Allows for face to face communication 
B) Creates a smaller organization 
C) Reduces the costs of business 
D) Concentrates decision making authority in a one or a small group of people 
E) Information can take more time to trickle down

Question 6

Which of the following is not a principal/agent relationship?

Accepted Answer

A) Shareholders/Company CEO 
B) Shareholders/Company employees 
C) Company/Hired counsel 
D) Carmaker/Auto part supplier 
E) Shareholder/IRS auditors of a company 
A) Shareholders/Company CEO 
B) Shareholders/Company employees 
C) Company/Hired counsel 
D) Carmaker/Auto part supplier 
E) Shareholder/IRS auditors of a company

Question 7

What type of performance measurement based process was used to determine Jack Welch's successor,Jeffrey Immelt,as CEO of GE?

Accepted Answer

A) Ratings compression 
B) Merit ratings system 
C) 360-degree peer review system 
D) Promotion tournament 
E) Management-by-objective system 
A) Ratings compression 
B) Merit ratings system 
C) 360-degree peer review system 
D) Promotion tournament 
E) Management-by-objective system

Question 8

What is a key factor in determining how a firm resolves coordination problems?

Accepted Answer

A) Incentive based pay 
B) Effective IT systems 
C) Firm culture 
D) Alignment of goals 
E) Organizational structure 
A) Incentive based pay 
B) Effective IT systems 
C) Firm culture 
D) Alignment of goals 
E) Organizational structure

Question 9

What term best refers to a wage payment made to an agent that exceeds his opportunity cost of working and discourages the agent from shirking?

Accepted Answer

A) Living wage 
B) Efficiency wage 
C) Minimum wage 
D) Efficiency payment 
E) Termination wage 
A) Living wage 
B) Efficiency wage 
C) Minimum wage 
D) Efficiency payment 
E) Termination wage

Question 10

What term best describes an agent who is indifferent between a sure thing and a gamble of equal expected value?

Accepted Answer

A) Risk sharing 
B) Risk seeking 
C) Risk neutral 
D) Risk averse 
E) Risk premium 
A) Risk sharing 
B) Risk seeking 
C) Risk neutral 
D) Risk averse 
E) Risk premium

Question 11

Which of the following is an example of a principal/agent relationship?

Accepted Answer

A) Company salesperson/Customer 
B) Company CEO/Company Vice President 
C) Company/Hired counsel 
D) Company/Company competitor 
E) Shareholder/IRS auditors of a company 
A) Company salesperson/Customer 
B) Company CEO/Company Vice President 
C) Company/Hired counsel 
D) Company/Company competitor 
E) Shareholder/IRS auditors of a company

Question 12

Which of the following terms best describes a review system in which a supervisor constructs a set of goals for an employee?

Accepted Answer

A) Traditional top down review system 
B) 360-degree peer review system 
C) Management-by-objective system 
D) Subjective performance evaluation 
E) Pay-for-performance 
A) Traditional top down review system 
B) 360-degree peer review system 
C) Management-by-objective system 
D) Subjective performance evaluation 
E) Pay-for-performance

Question 13

Which of the following terms best describes a contract that guarantees an agent some payment,but provides enough incentive so that the agent does not shirk?

Accepted Answer

A) Certainty equivalent contract 
B) Risk-sharing contract 
C) Risk premium contract 
D) Variability reduction contract 
E) Risk-averse contract 
A) Certainty equivalent contract 
B) Risk-sharing contract 
C) Risk premium contract 
D) Variability reduction contract 
E) Risk-averse contract

What term best describes how a firm performs based on a comparison to another firm in its peer set within an industry?

What is a benefit of the de-centralized organization coordination solution?

Which of the following is not a characteristic of performance based pay?

Herding is best described by which of the following??

How does a centralized organization solve coordination problems?

Which of the following is not a principal/agent relationship?

What type of performance measurement based process was used to determine Jack Welch's successor,Jeffrey Immelt,as CEO of GE?

What is a key factor in determining how a firm resolves coordination problems?

What term best refers to a wage payment made to an agent that exceeds his opportunity cost of working and discourages the agent from shirking?

What term best describes an agent who is indifferent between a sure thing and a gamble of equal expected value?

Which of the following is an example of a principal/agent relationship?

Which of the following terms best describes a review system in which a supervisor constructs a set of goals for an employee?

Which of the following terms best describes a contract that guarantees an agent some payment,but provides enough incentive so that the agent does not shirk?

The Power of Principles: A Historical Perspective

The Horizontal Boundaries of the Firm

The Vertical Boundaries of the Firm

Integration and Its Alternatives

Competitors and Competition

Entry and Exit

The Dynamics Competing Across Time

Industry Analysis

Strategic Positioning for Competitive Advantage

Information and Value Creation

Sustaining Competitive Advantage

Strategy and Structure

Environment, Power, and Culture

Economics Primer

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Exam 12: Performance Measurement and Incentives

What term best describes how a firm performs based on a comparison to another firm in its peer set within an industry?

What is a benefit of the de-centralized organization coordination solution?

Which of the following is not a characteristic of performance based pay?

Herding is best described by which of the following??

How does a centralized organization solve coordination problems?

Which of the following is not a principal/agent relationship?

What type of performance measurement based process was used to determine Jack Welch's successor,Jeffrey Immelt,as CEO of GE?

What is a key factor in determining how a firm resolves coordination problems?

What term best refers to a wage payment made to an agent that exceeds his opportunity cost of working and discourages the agent from shirking?

What term best describes an agent who is indifferent between a sure thing and a gamble of equal expected value?

Which of the following is an example of a principal/agent relationship?

Which of the following terms best describes a review system in which a supervisor constructs a set of goals for an employee?

Which of the following terms best describes a contract that guarantees an agent some payment,but provides enough incentive so that the agent does not shirk?

The Power of Principles: A Historical Perspective

The Horizontal Boundaries of the Firm

The Vertical Boundaries of the Firm

Integration and Its Alternatives

Competitors and Competition

Entry and Exit

The Dynamics Competing Across Time

Industry Analysis

Strategic Positioning for Competitive Advantage

Information and Value Creation

Sustaining Competitive Advantage

Strategy and Structure

Environment, Power, and Culture

Economics Primer

Filters