Question 1

Monitoring costs are:

Accepted Answer

A) the costs of a failure in bargaining. 
B) rarely incurred in contracts between a principal and an agent. 
C) the insurance costs of guaranteeing that the principal will not incur a cost of contract failure. 
D) the costs of reviewing and overseeing the actions of an agent. 
A) the costs of a failure in bargaining. 
B) rarely incurred in contracts between a principal and an agent. 
C) the insurance costs of guaranteeing that the principal will not incur a cost of contract failure. 
D) the costs of reviewing and overseeing the actions of an agent.

Question 2

Always Round Tire hires Plain Truth Advertising to write copy for its newspaper advertisements.Always Round has a demand for advertising of MB = 400 − 2S where S is the number of hours that Plain Truth works.If Plain Truth has a fixed supply cost given by MC = $150 per hour,what are the number of hours that Always Round purchases from Plain Truth under the assumption of costless monitoring? How much is the contract worth to Always Round? If Always Round offers half of the surplus to Plain Truth as an incentive,how much is Plain Truth paid for the job?

Accepted Answer

Setting marginal benefit equal to margin

Question 3

What is adverse selection? Give an example to illustrate this problem.

Accepted Answer

Adverse selection refers to the tendency

Monitoring costs are:

What is adverse selection? Give an example to illustrate this problem.

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

Organizational Architecture

Decision Rights: the Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

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

Exam 10: Incentive Conflicts and Contracts

Monitoring costs are:

What is adverse selection? Give an example to illustrate this problem.

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

Organizational Architecture

Decision Rights: the Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

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