The Organization of the Firm Page 1 of 8 The Organization of the Firm.pdf
The Organization of the Firm
the principal-agent problem exists not only between owners and managers, but also between managers
and
workers
profit sharing provides an incentive to increase effort by
paying workers based on the firm's success
linking workers' compensation to the underlying revenue of the firm is called
revenue sharing
suppose a company pays a landscaper $20 for every lawn he mows. what type of compensation is this?
piece rate
when a manager enters the workplace periodically to monitor workers, the manager is conducting a
spot check
pg. 1
The Organization of the Firm Page 1 of 8
, The Organization of the Firm Page 2 of 8 The Organization of the Firm.pdf
one disadvantage of revenue-based incentive schemes is that
there is no incentive to reduce costs
revenue sharing can be particularly effective when productivity is connected to _____ rather than costs.
revenue
contracts
- 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
contract
vertical integration
- mitigates transaction costs.
- reduces opportunism
pg. 2
The Organization of the Firm Page 2 of 8
The Organization of the Firm
the principal-agent problem exists not only between owners and managers, but also between managers
and
workers
profit sharing provides an incentive to increase effort by
paying workers based on the firm's success
linking workers' compensation to the underlying revenue of the firm is called
revenue sharing
suppose a company pays a landscaper $20 for every lawn he mows. what type of compensation is this?
piece rate
when a manager enters the workplace periodically to monitor workers, the manager is conducting a
spot check
pg. 1
The Organization of the Firm Page 1 of 8
, The Organization of the Firm Page 2 of 8 The Organization of the Firm.pdf
one disadvantage of revenue-based incentive schemes is that
there is no incentive to reduce costs
revenue sharing can be particularly effective when productivity is connected to _____ rather than costs.
revenue
contracts
- 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
contract
vertical integration
- mitigates transaction costs.
- reduces opportunism
pg. 2
The Organization of the Firm Page 2 of 8
