The Problem of Production in Multi-Plant Firms with Asymmetric Information

Multiple Choice

The problem of production in multi-plant firms with asymmetric information can be solved by paying the manager:

A) a piece rate, some constant amount per unit of output produced.
B) a larger amount for each unit than was paid for the previous unit, to reflect increasing marginal cost.
C) a smaller amount for each unit than was paid for the previous unit, to reflect decreasing marginal revenue.
D) an annual bonus that increases with each unit of output up to capacity, and decreases with each unit of output past capacity.
E) an annual bonus that is calculated decreases with each unit of output up to capacity, and increases with each unit of output past capacity.