The Organization of the Firm- Review Questions with Complete Answers Latest Update 2024 (100% Pass)

The Organization of the Firm- Review Questions with Complete Answers Latest Update 2024 (100% Pass) the principal-agent problem exists not only between owners and managers, but also between managers and - Answers workers profit sharing provides an incentive to increase effort by - Answers paying workers based on the firm's success linking workers' compensation to the underlying revenue of the firm is called - Answers revenue sharing suppose a company pays a landscaper $20 for every lawn he mows. what type of compensation is this? - Answers piece rate when a manager enters the workplace periodically to monitor workers, the manager is conducting a - Answers spot check one disadvantage of revenue-based incentive schemes is that - Answers there is no incentive to reduce costs revenue sharing can be particularly effective when productivity is connected to _____ rather than costs. - Answers revenue contracts - Answers - reduce underinvestment - reduce costly opportunism procuring inputs using a legal document that creates an extended relationship between the buyer and seller of an input is called a - Answers contract vertical integration - Answers - mitigates transaction costs. - reduces opportunism a manager's concern about his or her reputation and the threat of a takeover due to poor performance are examples of _____ incentives. - Answers external spot exchange, contracts, and vertical integration are all methods of procuring ___ (one word). - Answers inputs the conflict that results from the fact that a firm manager likes to earn income and also enjoys consuming leisure is called _____. - Answers the principle-agent problem when a firm produces its own inputs, it engages in ____ integration. - Answers vertical indicate one disadvantage of using contracts to obtain inputs. - Answers contracts is require costly, up-front expenditures the most straightforward way to obtain inputs is by ____. - Answers spot exchange when a buyer acquires inputs from a seller through an informal relationship, it is called _____ _____ (2 words) - Answers spot exchange once a firm makes a specialized investment, other firms may attempt to take advantage of the sunk nature of the investment. This is known as _______. - Answers - the "hold up" problem - opportunism it is optimal to acquire an input through a contract when - Answers - the contracting environment is simple. - the cost of the contract is less than the transaction costs when a firm produces the inputs it needs to make the final product, it practices which of the following? - Answers vertical integration disadvantages of contracts are that they are - Answers - unable to cover all contingencies - costly to write which of the following is a relative disadvantage of vertical integration? - Answers - a loss in the gains from specialization - management of multiple product lines the cost of bargaining increases when _____ imply(ies) that only a few parties are able to exchange. - Answers specialized investments performance-based reward programs for firm managers are typically called _____ contracts. - Answers incentive spot exchange refers to which of the following? - Answers informal relationship between buyer and seller _____ assets are general investments made by a firm that allow it to exchange with a particular buyer - Answers dedicated transaction costs include: - Answers - expenditures to facilitate exchange - search costs - negotiation costs when a firm's acquisition of an input does not involve specialized investments, it can use _____ exchange without concern for opportunism - Answers spot