Deck 21: Getting Employees to Work in the Firms Best Interest

Question 1

Which of the following addresses agency costs

A)spot checks of the quality of employee work
B)hiring only from job fairs
C)instituting longer work days
D)reducing the number of holidays

Answer 1

A

Question 2

The ways to address agency costs include all EXCEPT

A)running background checks on prospective employees
B)requiring employees to punch time clocks
C)instituting longer work days
D)replacing closed offices with cubical office spaces

Answer 2

C

Question 3

The ways to address agency costs include

A)gathering information about the agent's characteristics before hiring
B)gathering information about the agent's actions once hired
C)incentivizing agents to work on behalf of principals
D)all of the above

Answer 3

D

Question 4

The ways to address agency costs include all EXCEPT

A)running background checks on prospective employees
B)hiring only from job fairs
C)spot checks of the quality of employee work
D)replacing closed offices with cubical office spaces

Question 5

A potential problem arises in principal-agent relationships

A)because the agents' actions are not completely observed by the principals
B)because the principals' actions are not completely observed by the agents
C)because the agent's and the principals' actions are completely observed by each other
D)the observability of actions is irrelevant

Question 6

A consequence of an incentive contract for employees is that

A)employees must incur additional risk
B)employee level risk is reduced
C)employer level risk is reduced
D)there are no risk related consequences

Question 7

Which of the following addresses agency costs

A)advertising for employee positions in as many outlets as possible
B)requiring employees to punch time clocks
C)instituting longer work days
D)reducing the number of holidays

Question 8

Examples of incentive pay include

A)allowing employees a certain number of personal days
B)providing onsite parking for employees
C)cleaning the worksite with weekly janitorial service
D)prizes to the employee team to win a project goal tournament

Question 9

The types of problems in principal-agent relationships typically include

A)adverse selection - whom to hire
B)moral hazard - how to motivate workers
C)uncertainty - how many workers will be needed
D)a and b)

Question 10

Examples of incentive pay include

A)commission sales
B)providing onsite parking for employees
C)cleaning the worksite with weekly janitorial service
D)offering a certain number of sick days

Question 11

The ways to address agency costs include all EXCEPT

A)advertising for employee positions in as many outlets as possible
B)requiring employees to punch time clocks
C)spot checks of the quality of employee work
D)replacing closed offices with cubical office spaces

Question 12

Because incentive contracts result in more risk placed on the part of agents

A)the average level of compensation typically falls
B)the average level of compensation typically rises
C)compensation is unaffected
D)employers want employees to insure against wild compensation swings

Question 13

The ways to address agency costs include all EXCEPT

A)advertising for employee positions in as many outlets as possible
B)requiring employees to punch time clocks
C)spot checks of the quality of employee work
D)replacing closed offices with cubical office spaces

Question 14

Examples of incentive pay include

A)allowing employees a certain number of personal days
B)royalties to textbook authors
C)cleaning the worksite with weekly janitorial service
D)offering a certain number of sick days

Question 15

Examples of incentive pay include

A)allowing employees a certain number of personal days
B)providing onsite parking for employees
C)bonuses for meeting deadlines
D)offering a certain number of sick days

Question 16

Which of the following addresses agency costs

A)advertising for employee positions in as many outlets as possible
B)hiring only from job fairs
C)instituting longer work days
D)replacing closed offices with cubical office spaces

Question 17

Which of the following addresses agency costs

A)advertising for employee positions in as many outlets as possible
B)hiring only from job fairs
C)spot checks of the quality of employee work
D)reducing the number of holidays

Question 18

In managerial economics,agency costs refer to

A)booking travel arrangements
B)model and actor representation
C)imperfections in dealing with those hired
D)foreign espionage

Question 19

In a principal-agent relationship

A)the principal wants the agent to act on her behalf
B)the agent wants the principal to act on his behalf
C)the principal wants the agent to act on the behalf of others
D)the agent wants the principal to act on the behalf of others

Question 20

A potential problem arises in principal-agent relationships

A)because the agents and the principals have identical goals
B)because the principals may have different goals from the agents
C)because the agents may have different goals from the principals
D)the goals of principals and agents are irrelevant

Question 21

The components of a well-run incentive compensation scheme include all of the following EXCEPT

A)evaluating the identified performance measures
B)avoiding rewards for outcomes that are not included in the performance measures
C)rewarding workers who for meet performance measures
D)displaying the wealth disparities between the executives and the line workers

Question 22

When decision rights are decentralized,typically

A)decisions are being moved to those with less of the relevant information
B)decisions are being moved to those with stronger incentives to make good decisions
C)decisions are being moved away from those with more of the relevant information
D)decisions are being moved to those with weaker incentives to make good decisions

Question 23

The components of a well-run incentive compensation scheme include all of the following EXCEPT

A)evaluating the identified performance measures
B)demonstrating that supervisors are friendly outside of the work environment
C)rewarding workers who for meet performance measures
D)identifying the relevant measures on which to evaluate employees

Question 24

As a result of moving more decision making from the periphery of the organization toward the center,typically

A)the flow of information to the decision maker that is relevant to the decision should be enhanced
B)the flow of information from the decision maker that is relevant to the decision should be enhanced
C)the incentive structure for the decision maker should be strengthened
D)the incentive structure for the decision maker can be eliminated

Question 25

In organizational design issues,decision rights pertain to

A)the legal workplace related rights of employees
B)the regulations governing how a potential customer chooses which product to purchase
C)the set of decisions that go with a particular position within the firm
D)who gets to decide from which place co-workers will order lunch

Question 26

The conflict between the Vice President of Marketing and her sales staff arises because

A)the sales staff are too willing to offer discounts
B)the Vice President does not want to negotiate aggressively enough
C)the sales staff want to negotiate too aggressively
D)the Vice President is more willing to offer discounts to make the sale

Question 27

An incentive compensation scheme includes

A)a performance evaluation system
B)a disciplinary action committee
C)a reward system
D)a)and c)

Question 28

As a result of moving more decision making from the periphery of the organization toward the center,typically

A)the flow of information to the decision maker that is relevant to the decision can be weakened
B)the flow of information from the decision maker that is relevant to the decision should be enhanced
C)the incentive structure for the decision maker should be strengthened
D)the incentive structure are usually already in place

Question 29

When a manager's bonuses are tied to multiple unrelated performance measures

A)we typically see the manager miss all goals by about the same amount
B)we typically see the manager greatly exceeding some goals while missing others altogether
C)we typically see the manager just meeting some goals while missing others by a wide margin
D)we typically see the manager indifferent to the goals

Question 30

The three central questions for efficient organizational design include all EXCEPT

A)does the decision maker have the relevant information?
B)is the decision maker in a supervisory role?
C)who is making the decision?
D)does the decision maker have an incentive to make a good decision?

Question 31

When decision rights are decentralized,typically

A)decisions are being moved to those with more of the relevant information
B)decisions are being moved to those with stronger incentives to make good decisions
C)decisions are being moved from those with more of the relevant information
D)decisions are being moved from those with weaker incentives to make good decisions

Question 32

When decision rights are decentralized,typically

A)decisions are being moved to those with less of the relevant information
B)decisions are being moved to those with stronger incentives to make good decisions
C)decisions are being moved to those with more of the relevant information
D)decisions are being moved from those with weaker incentives to make good decisions

Question 33

Incentive contracts typically result in higher risk-related compensation to agents on average,

A)even so,they are always worth it
B)this does not affect their desirability
C)as a consequence,they may cost more than the problem they solve
D)therefore,they are never worth it

Question 34

Potential problems with incentive based compensation are

A)not evaluating the relevant performance measures
B)rewarding outcomes that are not include in the performance evaluation
C)not funding rewards for meeting performance measures
D)all of the above

Question 35

When decision rights are decentralized,typically

A)decisions are being moved to those with less of the relevant information
B)decisions are being moved from those with stronger incentives to make good decisions
C)decisions are being moved from those with more of the relevant information
D)decisions are being moved from those with weaker incentives to make good decisions

Question 36

The components of a well-run incentive compensation scheme include all of the following EXCEPT

A)evaluating the identified performance measures
B)avoiding rewards for outcomes that are not included in the performance measures
C)demonstrating that evaluators can be influenced with small favors
D)identifying the relevant measures on which to evaluate employees

Question 37

As a result of moving more decision making from the center toward the periphery of the organization,typically

A)the flow of information to the decision maker that is relevant to the decision should be enhanced
B)the flow of information from the decision maker that is relevant to the decision should be enhanced
C)the incentives to make good decisions should be strengthened
D)the procedures for the flow of information that is relevant to the decision can be relaxed

Question 38

The components of a well-run incentive compensation scheme include all of the following EXCEPT

A)performing random acts of kindness to employees
B)avoiding rewards for outcomes that are not included in the performance measures
C)rewarding workers who for meet performance measures
D)identifying the relevant measures on which to evaluate employees

Question 39

As a result of moving more decision making from the center toward the periphery of the organization,typically

A)the flow of information to the decision maker that is relevant to the decision should be enhanced
B)the flow of information from the decision maker that is relevant to the decision should be enhanced
C)the incentives to make good decisions should be strengthened
D)the incentives to make good decisions should be weakened

Question 40

The conflict between the Vice President of Marketing and her sales staff arises because

A)the sales staff are unwilling to offer discounts
B)the Vice President does not want to negotiate aggressively enough
C)the sales staff do not want to negotiate too aggressively
D)the Vice President is more willing to offer discounts to make the sale

Question 41

The conflict between the Vice President of Marketing and her sales staff arises because

A)the sales staff are unwilling to offer discounts
B)the Vice President does not want to negotiate aggressively enough
C)the sales staff want to negotiate too aggressively
D)the Vice President is less willing to offer discounts to make the sale

Question 42

The conflict between the Vice President of Marketing and her sales staff arises because

A)the sales staff are unwilling to offer discounts
B)the Vice President want to negotiate more aggressively
C)the sales staff want to negotiate too aggressively
D)the Vice President is more willing to offer discounts to make the sale

Question 43

In a franchising relationship

A)the franchisor is the principal
B)the agent is the franchisor
C)the franchisor is the agent
D)the principal is the franchisee

Question 44

In a franchising relationship

A)the franchisor is the local businessman or businesswoman
B)the trademark holder contracting with local operations is the franchisor
C)the franchisor is the trademark holder contracting with local operations
D)the trademark holder contracting with local operations is the franchisee