Question 1

Spot checks work because of

Accepted Answer

A) the promise of a reward. 
B) a promise of performance-based pay. 
C) a potential penalty for shirking. 
D) monitoring on a regular basis. 
A) the promise of a reward. 
B) a promise of performance-based pay. 
C) a potential penalty for shirking. 
D) monitoring on a regular basis. C

Question 2

The disadvantage of vertical integration is that

Accepted Answer

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

Question 3

Point "A" in the above graph is

Accepted Answer

A) efficient since it produces 20 units of output at the lowest possible cost. 
B) efficient since it produces 10 units of output at the lowest possible cost. 
C) inefficient since it produces 20 units of output at a cost greater than the minimum cost. 
D) inefficient since it produces 10 units of output at a cost greater than the minimum cost. 
A) efficient since it produces 20 units of output at the lowest possible cost. 
B) efficient since it produces 10 units of output at the lowest possible cost. 
C) inefficient since it produces 20 units of output at a cost greater than the minimum cost. 
D) inefficient since it produces 10 units of output at a cost greater than the minimum cost. C

Question 4

By reducing performance-based rewards to CEO's the profits of the firm will

Accepted Answer

A) rise. 
B) fall. 
C) remain constant. 
D) none of the statements associated with this question are correct. 
A) rise. 
B) fall. 
C) remain constant. 
D) none of the statements associated with this question are correct.

Question 5

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

Accepted Answer

A) A laborer. 
B) A self-proprietor. 
C) An assembly worker. 
D) A firm manager. 
A) A laborer. 
B) A self-proprietor. 
C) An assembly worker. 
D) A firm manager.

Question 6

You are the manager of Door-to-Door Vacuum Cleaners, Inc.Each salesperson is paid a base salary plus a percentage of the revenues she or he generates.In addition, each salesperson drives his or her car to and from each sales call and is reimbursed $0.40 per mile driven.On average, each salesperson drives about 150 miles per day and 240 days per year.As manager of Door-to-Door, how might you restructure the compensation of your sales force to enhance your profits? Are there any potential disadvantages of your plan? Explain.

Accepted Answer

The manager might pay a salesp

Question 7

Which of the following involves the least risk from the point of view of the employee?

Accepted Answer

A) piece rate. 
B) profit sharing. 
C) revenue sharing. 
D) annual salary. 
A) piece rate. 
B) profit sharing. 
C) revenue sharing. 
D) annual salary.

Question 8

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.

Accepted Answer

a.Makes contracts a less attractive form

Question 9

As firms increase in size, they tend to experience a

Accepted Answer

A) decrease in the need for managers needed. 
B) decrease in transaction costs. 
C) loss of opportunity cost. 
D) none of the statements associated with this question are correct. 
A) decrease in the need for managers needed. 
B) decrease in transaction costs. 
C) loss of opportunity cost. 
D) none of the statements associated with this question are correct.

Question 10

Which of the following methods might be an efficient way of obtaining inputs when specialized investments are not important?

Accepted Answer

A) spot exchange. 
B) vertical integration. 
C) profit-sharing. 
D) long-term contracts. 
A) spot exchange. 
B) vertical integration. 
C) profit-sharing. 
D) long-term contracts.

Question 11

A manager who attempts to enhance worker effort by making workers' compensation tied to the profitability of the firm is using:

Accepted Answer

A) Spot checks. 
B) Revenue sharing. 
C) Profit sharing. 
D) Piece rates. 
A) Spot checks. 
B) Revenue sharing. 
C) Profit sharing. 
D) Piece rates.

Question 12

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 statements associated with this question are correct. 
A) manager-worker, principal-agent problem. 
B) manager-owner, principal-agent problem. 
C) owner-worker, principal-agent problem. 
D) none of the statements associated with this question are correct.

Question 13

Given that the income of franchise restaurant managers is directly tied to profits and the income of the manager of the company owned restaurant is paid a flat fee, we might expect profits to be

Accepted Answer

A) higher in company-owned restaurants. 
B) lower in company-owned restaurants. 
C) equal in both types of restaurants. 
D) none of the statements associated with this question are correct. 
A) higher in company-owned restaurants. 
B) lower in company-owned restaurants. 
C) equal in both types of restaurants. 
D) none of the statements associated with this question are correct.

Question 14

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 15

The most likely effect of reducing performance-based rewards for CEO's of corporations would be:

Accepted Answer

A) An increase in profits. 
B) A drop in revenues. 
C) A drop in profits. 
D) An increase in the value of the corporation. 
A) An increase in profits. 
B) A drop in revenues. 
C) A drop in profits. 
D) An increase in the value of the corporation.

Question 16

EFI conveyor systems recent visited a local AC motor distributor.This transaction most likely involves

Accepted Answer

A) spot exchange. 
B) vertical integration. 
C) contract. 
D) contract or vertical integration. 
A) spot exchange. 
B) vertical integration. 
C) contract. 
D) contract or vertical integration.

Question 17

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

Accepted Answer

A) do not always coincide with those of the principal. 
B) do not overlap with those of the principal. 
C) coincide with those of the principal. 
D) overlap with those of the principal. 
A) do not always coincide with those of the principal. 
B) do not overlap with those of the principal. 
C) coincide with those of the principal. 
D) overlap with those of the principal.

Question 18

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

Accepted Answer

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

Question 19

Transactions costs refer to

Accepted Answer

A) fixed costs of capital. 
B) variable costs of labor. 
C) costs of exchange unrelated to production costs. 
D) economies of scale. 
A) fixed costs of capital. 
B) variable costs of labor. 
C) costs of exchange unrelated to production costs. 
D) economies of scale.

Question 20

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

Accepted Answer

A) revenue sharing. 
B) profit sharing. 
C) time clocks and spot checks. 
D) the threat of a takeover. 
A) revenue sharing. 
B) profit sharing. 
C) time clocks and spot checks. 
D) the threat of a takeover.

Spot checks work because of

The disadvantage of vertical integration is that

Point "A" in the above graph is

By reducing performance-based rewards to CEO's the profits of the firm will

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

Which of the following involves the least risk from the point of view of the employee?

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.

As firms increase in size, they tend to experience a

Which of the following methods might be an efficient way of obtaining inputs when specialized investments are not important?

A manager who attempts to enhance worker effort by making workers' compensation tied to the profitability of the firm is using:

Piece rates are typically a solution to the

Given that the income of franchise restaurant managers is directly tied to profits and the income of the manager of the company owned restaurant is paid a flat fee, we might expect profits to be

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

The most likely effect of reducing performance-based rewards for CEO's of corporations would be:

EFI conveyor systems recent visited a local AC motor distributor.This transaction most likely involves

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

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

Transactions costs refer to

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

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

Spot checks work because of

The disadvantage of vertical integration is that

Point "A" in the above graph is

By reducing performance-based rewards to CEO's the profits of the firm will

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

Which of the following involves the least risk from the point of view of the employee?

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.

As firms increase in size, they tend to experience a

Which of the following methods might be an efficient way of obtaining inputs when specialized investments are not important?

A manager who attempts to enhance worker effort by making workers' compensation tied to the profitability of the firm is using:

Piece rates are typically a solution to the

Given that the income of franchise restaurant managers is directly tied to profits and the income of the manager of the company owned restaurant is paid a flat fee, we might expect profits to be

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

The most likely effect of reducing performance-based rewards for CEO's of corporations would be:

EFI conveyor systems recent visited a local AC motor distributor.This transaction most likely involves

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

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

Transactions costs refer to

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

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