Question 1

Public goods are goods that have

Accepted Answer

A) only a few low income consumers. 
B) clear property right. 
C) nonexcludability and nonrivalrous. 
D) features that cannot be addressed by creating property rights. 
A) only a few low income consumers. 
B) clear property right. 
C) nonexcludability and nonrivalrous. 
D) features that cannot be addressed by creating property rights.

Question 2

When employees are paid more than their worth when they are hired and less than their worth near retirement

Accepted Answer

A) compensation is forward loaded. 
B) compensation is backloaded. 
C) compensation is fair. 
D) compensation is independent of productivity. 
A) compensation is forward loaded. 
B) compensation is backloaded. 
C) compensation is fair. 
D) compensation is independent of productivity.

Question 3

If older employees are being paid less than their value to the firm, their compensation is being backloaded.

Accepted Answer

A) True 
 B)False

Question 4

A wage profile rises because

Accepted Answer

A) employees become more productive over time. 
B) employees become less productive over time. 
C) managers are better able to monitor employees. 
D) increases in the minimum wages push up other wages. 
A) employees become more productive over time. 
B) employees become less productive over time. 
C) managers are better able to monitor employees. 
D) increases in the minimum wages push up other wages.

Question 5

Some people argue that limiting a CEO's pay may be a way to create good incentives.

Accepted Answer

A) True 
 B)False

Question 6

Principals need to monitor agents.

Accepted Answer

A) True 
 B)False

Question 7

The income of managers is often ____ diversified compared to the income of stockholders.

Accepted Answer

A) more easily 
B) equally easily 
C) less easily 
D) smaller 
A) more easily 
B) equally easily 
C) less easily 
D) smaller

Question 8

Piecework compensation plans are useful when productivity is difficult to measure.

Accepted Answer

A) True 
 B)False

Question 9

Subjective evaluations

Accepted Answer

A) lend themselves to easy measurement. 
B) are objective in nature. 
C) are directly measured by productivity. 
D) are based on opinion. 
A) lend themselves to easy measurement. 
B) are objective in nature. 
C) are directly measured by productivity. 
D) are based on opinion.

Question 10

Free-riding is linked to an absence of monitoring behavior.

Accepted Answer

A) True 
 B)False

Question 11

Free riding can be found in team structures.

Accepted Answer

A) True 
 B)False

Question 12

Economists would largely motivate employees by appealing to their

Accepted Answer

A) compensation. 
B) need for time off. 
C) intrinsic motivation. 
D) none of these choices. 
A) compensation. 
B) need for time off. 
C) intrinsic motivation. 
D) none of these choices.

Question 13

Goods that cannot be consumed without excluding other consumers are

Accepted Answer

A) public goods. 
B) free. 
C) are not scarce. 
D) all of these choices. 
A) public goods. 
B) free. 
C) are not scarce. 
D) all of these choices.

Question 14

A piecework wage compensation may be used if productivity

Accepted Answer

A) can be related to the supply chain. 
B) is easy to measure. 
C) is difficult to observe. 
D) is backloaded. 
A) can be related to the supply chain. 
B) is easy to measure. 
C) is difficult to observe. 
D) is backloaded.

Question 15

Risk-sharing forms of compensation are beneficial if employee are

Accepted Answer

A) risk preferring. 
B) risk neutral. 
C) risk averse. 
D) prefer more to less. 
A) risk preferring. 
B) risk neutral. 
C) risk averse. 
D) prefer more to less.

Question 16

After people buy insurance, they are more likely to build a beach house out of wood framing rather than concrete block.This is an example of

Accepted Answer

A) risk aversion. 
B) moral hazard. 
C) risk neutrality. 
D) free riding in teams. 
A) risk aversion. 
B) moral hazard. 
C) risk neutrality. 
D) free riding in teams.

Question 17

To avoid wage compression,

Accepted Answer

A) employees probably need to change companies. 
B) employees need to speak to their supervisors. 
C) employees need to sign a deferred compensation contract. 
D) managers need to pay above the minimum wage. 
A) employees probably need to change companies. 
B) employees need to speak to their supervisors. 
C) employees need to sign a deferred compensation contract. 
D) managers need to pay above the minimum wage.

Question 18

Lincoln Electric used backloaded compensation.

Accepted Answer

A) True 
 B)False

Question 19

If a wage profile is relatively flat, wage compression may be present.

Accepted Answer

A) True 
 B)False

Question 20

Ways to address free riding include

Accepted Answer

A) profit-sharing. 
B) subjective evaluations. 
C) improved monitoring. 
D) all of these choices. 
A) profit-sharing. 
B) subjective evaluations. 
C) improved monitoring. 
D) all of these choices.

Exam 6: Market Failures and Incentive Issues Inside the Firm

Public goods are goods that have

When employees are paid more than their worth when they are hired and less than their worth near retirement

If older employees are being paid less than their value to the firm, their compensation is being backloaded.

A wage profile rises because

Some people argue that limiting a CEO's pay may be a way to create good incentives.

Principals need to monitor agents.

The income of managers is often ____ diversified compared to the income of stockholders.

Piecework compensation plans are useful when productivity is difficult to measure.

Subjective evaluations

Free-riding is linked to an absence of monitoring behavior.

Free riding can be found in team structures.

Economists would largely motivate employees by appealing to their

Goods that cannot be consumed without excluding other consumers are

A piecework wage compensation may be used if productivity

Risk-sharing forms of compensation are beneficial if employee are

After people buy insurance, they are more likely to build a beach house out of wood framing rather than concrete block.This is an example of

To avoid wage compression,

Lincoln Electric used backloaded compensation.

If a wage profile is relatively flat, wage compression may be present.

Ways to address free riding include

Economics and Management

The Power of Markets and the Wealth of Nations

Spontaneous Order, Markets, and Market Failure

Spontaneous Order and the Firm

Organization of the Firm

When Other Firms Dont Respond

When Other Firms React

The Entrepreneur and the Market Process

Strategies With Respect to Government

What Should the Firm Do

Demand and Revenue Management

Costs

The Mechanics of Profit Maximization

Pricing

The Knowledge Economy

The Corporate Form and the Cost of Capital

Internal Markets

Measuring Economic Profit

The Firm in a National and a Global Setting

Strategy Myths

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