Question 1

If output Q = 8.5e (e = units of effort)and Wage,W = $6.70 + 0.25Q,then 20 units of effort are worth ______ to the firm.

Accepted Answer

A) $170.00 
B) $0.425 
C) $49.20 
D) $35.80 
A) $170.00 
B) $0.425 
C) $49.20 
D) $35.80 C

Question 2

Objective measures included in an evaluation and incentive system might include:

Accepted Answer

A) improved quality of communications with subordinates. 
B) meeting or exceeding sales goals. 
C) reorganizing a department for improved human relations. 
D) recognition for finding and solving problems. 
A) improved quality of communications with subordinates. 
B) meeting or exceeding sales goals. 
C) reorganizing a department for improved human relations. 
D) recognition for finding and solving problems. B

Question 3

The goal of a performance pay system is to get an employee to meet and exceed production quotas or goals.But an employee is always faced with events that are clearly beyond his/her control.What measures can be taken by the management to understand and minimize the impact of these 'random' elements in the production system?

Accepted Answer

Actual employee effort may be impossible to measure due to asymmetric information.However,it is important for the management to try to measure,as much as possible,True effort,as long as it is not too costly to devise such measurements.One method that can be used is relative performance evaluation.The employee's performance is measured relative to peers' performance.This method is more likely to be useful if all peers in the comparison group are subject to the same random elements.Another method that can be used is peer evaluation or 360-degree evaluation.This method seeks to gather as much information as possible from others about the employee's True effort,and often uses subjective rating scales.Again,the cost of implementation should be taken into account.

Question 4

Which of the following should not be on a list of things you should do to get an honest evaluation?

Accepted Answer

A) Have a list of creative solutions to problems that you have encountered. 
B) Show how your output influenced the profitability of your division. 
C) Illustrate how your actions will improve the company next year. 
D) Take your manager to dinner the night before evaluations are due. 
A) Have a list of creative solutions to problems that you have encountered. 
B) Show how your output influenced the profitability of your division. 
C) Illustrate how your actions will improve the company next year. 
D) Take your manager to dinner the night before evaluations are due.

Question 5

If a company wants an employee to average about $14.00 per hour to produce 60 units per hour,in addition to a base salary of $7.00 per hour,what should be the incentive rate per hour?

Accepted Answer

A) $0.117 
B) $8.54 
C) $0.333 
D) $1.25 
A) $0.117 
B) $8.54 
C) $0.333 
D) $1.25

Question 6

Identify the correct statement related to objective and subjective performance measures.

Accepted Answer

A) Subjective measures are used in explicit formal contracts. 
B) Subjective measures induce dysfunctional behaviors while objective measures do not. 
C) Objective measures are more accurate than subjective measures. 
D) Objective measures can create incentives for gaming. 
A) Subjective measures are used in explicit formal contracts. 
B) Subjective measures induce dysfunctional behaviors while objective measures do not. 
C) Objective measures are more accurate than subjective measures. 
D) Objective measures can create incentives for gaming.

Question 7

In a very basic principal-agent model,output is contractible if:

Accepted Answer

A) output can be observed with some positive cost. 
B) the employee produces many products. 
C) the employee works in a team. 
D) output can be observed at zero cost. 
A) output can be observed with some positive cost. 
B) the employee produces many products. 
C) the employee works in a team. 
D) output can be observed at zero cost.

Question 8

While production teams are important sources of productivity in business,they can suffer from the ______ problem.

Accepted Answer

A) free rider 
B) reneging 
C) externality 
D) benchmark 
A) free rider 
B) reneging 
C) externality 
D) benchmark

Question 9

If performance evaluation of work is used to change wages,raises,bonuses,or dismissals,then the system is designed to:

Accepted Answer

A) indicate when training is required. 
B) provide the employee with a system of self-assessment. 
C) reduce risk-taking on the part of the employee. 
D) determine rewards and sanctions for the employee. 
A) indicate when training is required. 
B) provide the employee with a system of self-assessment. 
C) reduce risk-taking on the part of the employee. 
D) determine rewards and sanctions for the employee.

Question 10

Which of these is a drawback of forming an internal reference group and using the group average to assess normal performance?

Accepted Answer

A) High influence cost incurred by employees 
B) Forced distributions 
C) Shirking among supervisors 
D) Explicit employee collusion that tends to hold down the benchmark 
A) High influence cost incurred by employees 
B) Forced distributions 
C) Shirking among supervisors 
D) Explicit employee collusion that tends to hold down the benchmark

Question 11

The old saying is "Be careful what you pay for,because you may get it." Discuss commission based salaries and gaming in light of the saying.

Accepted Answer

Commission based salaries will direct ef

Question 12

If a work performance measure is based on both objective and subjective measures,the objective measure would be:

Accepted Answer

A) the number of units produced. 
B) employee dependability. 
C) quality of units produced. 
D) employees' willingness to cooperate with coworkers. 
A) the number of units produced. 
B) employee dependability. 
C) quality of units produced. 
D) employees' willingness to cooperate with coworkers.

Question 13

In a very basic principal-agent model,output is contractible if:

Accepted Answer

A) output can be observed with some positive cost. 
B) the employee produces many products. 
C) the employee works in a team. 
D) the employee produces a single output. 
A) output can be observed with some positive cost. 
B) the employee produces many products. 
C) the employee works in a team. 
D) the employee produces a single output.

Question 14

Relative performance evaluation reduces the labor cost borne by the firm by:

Accepted Answer

A) ratcheting up each year's performance targets. 
B) focusing on the near term while setting incentive pay. 
C) using the employee's output for setting the compensation. 
D) filtering out common shocks from employee incentive pay. 
A) ratcheting up each year's performance targets. 
B) focusing on the near term while setting incentive pay. 
C) using the employee's output for setting the compensation. 
D) filtering out common shocks from employee incentive pay.

Question 15

Which of the following is not a problem with subjective performance evaluations?

Accepted Answer

A) Shirking among supervisors 
B) Forced distributions of results by upper management 
C) Ability to rank employees on a standard rating scale 
D) Use of influence to bias outcomes 
A) Shirking among supervisors 
B) Forced distributions of results by upper management 
C) Ability to rank employees on a standard rating scale 
D) Use of influence to bias outcomes

Question 16

A salesperson's bonus for this year is based on meeting targets based on last year's sales.This year turns out to be an unusually good year.The salesperson is likely to:

Accepted Answer

A) meet the target easily and push forward with all potential sales. 
B) fail to meet the last year's targets because of overconfidence. 
C) just be satisfied with meeting last year's target. 
D) defer some sales to the next fiscal year. 
A) meet the target easily and push forward with all potential sales. 
B) fail to meet the last year's targets because of overconfidence. 
C) just be satisfied with meeting last year's target. 
D) defer some sales to the next fiscal year.

Question 17

The subjective evaluation method that requires the evaluator to rank the employees on a number of different performance factors using a five point scale is called a(n):

Accepted Answer

A) 360-degree performance system. 
B) internal benchmarking system. 
C) goal-based rating system. 
D) standard rating scale system. 
A) 360-degree performance system. 
B) internal benchmarking system. 
C) goal-based rating system. 
D) standard rating scale system.

Question 18

In the model Q = αe + µ,management cannot readily observe:

Accepted Answer

A) Q and e. 
B) Q and α. 
C) Q and µ. 
D) e and µ. 
A) Q and e. 
B) Q and α. 
C) Q and µ. 
D) e and µ.

Question 19

TruLite is managed by Fred Powell.It has three stages of production: (1)light fabrication,(2)switch assembly,and (3)boxing.Chris Self works in the switch assembly department.He is productive and seems to work hard.Powell decides to change Chris Self's pay system to a performance-based pay system that will be determined by output per hour.Chris resists the change and asks for increase in his base pay.What is Chris Self's problem? Is he irrational or does he understand something about the production system that Fred Powell does not understand?

Accepted Answer

Chris is probably acting rationally.Even

Question 20

Beyond some minimum level of effort,it is usually expected that teamwork will have the impact of ______ relative to individual effort.

Accepted Answer

A) reducing output 
B) leaving output the same 
C) increasing output 
D) reducing and then increasing the output 
A) reducing output 
B) leaving output the same 
C) increasing output 
D) reducing and then increasing the output

Exam 16: Individual Performance Evaluation

If output Q = 8.5e (e = units of effort)and Wage,W = $6.70 + 0.25Q,then 20 units of effort are worth ______ to the firm.

Objective measures included in an evaluation and incentive system might include:

Which of the following should not be on a list of things you should do to get an honest evaluation?

If a company wants an employee to average about $14.00 per hour to produce 60 units per hour,in addition to a base salary of $7.00 per hour,what should be the incentive rate per hour?

Identify the correct statement related to objective and subjective performance measures.

In a very basic principal-agent model,output is contractible if:

While production teams are important sources of productivity in business,they can suffer from the ______ problem.

If performance evaluation of work is used to change wages,raises,bonuses,or dismissals,then the system is designed to:

Which of these is a drawback of forming an internal reference group and using the group average to assess normal performance?

The old saying is "Be careful what you pay for,because you may get it." Discuss commission based salaries and gaming in light of the saying.

If a work performance measure is based on both objective and subjective measures,the objective measure would be:

In a very basic principal-agent model,output is contractible if:

Relative performance evaluation reduces the labor cost borne by the firm by:

Which of the following is not a problem with subjective performance evaluations?

A salesperson's bonus for this year is based on meeting targets based on last year's sales.This year turns out to be an unusually good year.The salesperson is likely to:

The subjective evaluation method that requires the evaluator to rank the employees on a number of different performance factors using a five point scale is called a(n):

In the model Q = αe + µ,management cannot readily observe:

Beyond some minimum level of effort,it is usually expected that teamwork will have the impact of ______ relative to individual effort.

Introduction

Economists View of Behavior

Exchange and Markets

Demand

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: the Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: the Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters