Question 1

It is in the self-interest of individuals to:

Accepted Answer

A)  minimize the total contracting costs in any relationship.
B)  maximize the total contracting costs in any relationship.
C)  eliminate the total bargaining costs in any relationship.
D)  reduce value through formal contracting costs.E) A) and B)
F) All of the above

Question 2

Incentive problems in contractual relationships generate:

Accepted Answer

A)  revenues that increase value.
B)  revenues that decrease value.
C)  costs that increase value.
D)  costs that decrease value.E) All of the above
F) A) and D)

Question 3

In most models of managerial conflict,the owner is the ______ and the manager is the ______.

Accepted Answer

A)  wage earner; stockholder
B)  employee; director
C)  principal; agent
D)  resource; resource ownerE) B) and C)
F) C) and D)

Question 4

Designing efficient contracts are costly when:

Accepted Answer

A)  there is perquisite involved.
B)  there is complete information.
C)  there is asymmetric information.
D)  there is an agency relationship.E) B) and D)
F) B) and C)

Question 5

Which of the following is not a problem in owner-manager or principal-agent conflicts?

Accepted Answer

A)  Choice of effort
B)  Perquisite taking
C)  Identical time horizons
D)  Differential risk exposureE) A) and B)
F) C) and D)

Question 6

Kaneshi Hartfield is a sales representative with Plain Truth Advertising.She is an excellent sales representative,but corporate management feels that she is too independent.But they are afraid to act,since Kaneshi maintains her own list of key contacts.This is an example of:

Accepted Answer

A)  an asymmetric information problem.
B)  different time horizons of the sales representative and management.
C)  the free rider problem.
D)  the failure of bargaining.E) B) and C)
F) C) and D)

Question 7

Mary Jo Smith is willing to work for $3,200 per month.She asks the HR manager at Plain Truth Advertising for $4,000 per month.He was willing to pay only $3,700 per month,so he rejects her application and begins to search for a new employee again.This is an example of:

Accepted Answer

A)  adverse selection.
B)  value maximization.
C)  bargaining failure.
D)  agency problem.E) A) and D)
F) B) and C)

Question 8

While many managers and lawyers might claim that implicit contracts "aren't worth the paper that they are not written on," most understandings between companies and their customers and employees are implicit.Why?

Accepted Answer

Repeated interactions and reputations ca...

Question 9

An informal understanding about the quality of product components supplied is a key to the relationship between most companies and their suppliers.This is a good example of:

Accepted Answer

A)  an implicit contract.
B)  an explicit contract.
C)  a principal-agent conflict resolution.
D)  an adverse selection problem.E) A) and B)
F) None of the above

Question 10

______ makes designing efficient contracts costly.

Accepted Answer

A)  Signaling
B)  Self-selection
C)  Huge monitoring costs for the principal
D)  Huge monitoring costs for the agentE) C) and D)
F) A) and B)

Question 11

Joan Petty,a human resource manager,offers Billy Self $2,750 per month as an inventory manager.She is willing to offer $750 more per month,but Billy does not have that information and walks away from the job offer.This is an example of a:

Accepted Answer

A)  market at work.
B)  bargaining success.
C)  bargaining failure.
D)  market in transition.E) B) and D)
F) A) and B)

Question 12

What are some ways of reducing adverse selection in the insurance market?

Accepted Answer

Self-selection and signaling may be two ...

Question 13

A firm is a focal point for a set of contracts.Explain the problems that (1)agency relationships,(2)asymmetric information,and (3)adverse selection can introduce to building a successful contract between two people.

Accepted Answer

Agency relationships can be exploited wh...

Question 14

Total agency costs are:

Accepted Answer

A)  the monitoring costs plus residual loss.
B)  the monitoring costs plus out of pocket costs.
C)  out of pocket costs plus residual loss.
D)  out of pocket costs minus residual loss.E) B) and C)
F) All of the above

Question 15

Which one of the following is a source of conflict between owners and managers?

Accepted Answer

A)  The amount owners and the managers want to pay to the shareholders
B)  The amount owners and the managers want to receive
C)  The amount owners want to pay and the amount managers want to receive
D)  The amount owners want to receive and the amount managers want to payE) A) and B)
F) None of the above

Question 16

Which one of the following is a big problem in large groups?

Accepted Answer

A)  Useless group leader
B)  Adverse selection problem
C)  Free-rider problem
D)  Buyer-supplier conflictsE) All of the above
F) B) and C)

Question 17

Precontractual informational asymmetries that generate contracting costs can lead to

Accepted Answer

A)  bargaining failures and adverse selection.
B)  implicit contracts and reputational concerns.
C)  explicit contracts and credibility issues.
D)  perquisite taking and differential risk exposure.E) C) and D)
F) All of the above

Question 18

FancyFoods restaurant decided to introduce an all-you-can-eat buffet on Tuesdays and Wednesdays to increase business.They found that they acquired a whole new set of customers,most of whom were very big eaters.After a time,they increased the price of the buffet.FancyFoods suffered from the problem of:

Accepted Answer

A)  excessive high costs.
B)  adverse selection.
C)  .incentives
D)  implicit contractsE) A) and D)
F) B) and C)

Question 19

Which one of the following is a source of conflict between owners and managers?

Accepted Answer

A)  Managers are often reluctant to increase the size of the firm.
B)  Owners are reluctant to lay off the manager and want to empire-build.
C)  Managers are reluctant to lay off their friends and want to empire-build.
D)  Owners are reluctant to lay off their friends and want to empire-build.E) A) and C)
F) B) and C)

Question 20

Billy Mac Tailor drives an eighteen-wheeler CG Carriers.He always stops at All Bright truck stops to buy diesel fuel.He is a preferred customer and gets a free meal and shower worth $10.00.But All Bright charges $12.00 more for a fill up than most competitors.Which of the following is true?

Accepted Answer

A)  CG Carriers gets a benefit of $22.00 because Tailor is a preferred customer.
B)  CG Carriers has a wealth reduction of $2.00 even though they do not know about Tailor's actions.
C)  There is a wealth transfer to Billy Mac Tailor and CG Carriers has a wealth reduction of $12.00.
D)  Billy Mac Tailor increases his income by $10.00 and CG Carriers also benefits.E) A) and B)
F) A) and C)

Exam 10: Incentive Conflicts and Contracts

Designing efficient contracts are costly when:

Correct Answer
verified

An informal understanding about the quality of product components supplied is a key to the relationship between most companies and their suppliers.This is a good example of:

Correct Answer
verified

Incentive problems in contractual relationships generate:

Correct Answer
verified

______ makes designing efficient contracts costly.

Correct Answer
verified

Correct Answer
verified

Kaneshi Hartfield is a sales representative with Plain Truth Advertising.She is an excellent sales representative,but corporate management feels that she is too independent.But they are afraid to act,since Kaneshi maintains her own list of key contacts.This is an example of:

Correct Answer
verified

Precontractual informational asymmetries that generate contracting costs can lead to

Correct Answer
verified

Mary Jo Smith is willing to work for $3,200 per month.She asks the HR manager at Plain Truth Advertising for $4,000 per month.He was willing to pay only $3,700 per month,so he rejects her application and begins to search for a new employee again.This is an example of:

Correct Answer
verified

Which one of the following is a source of conflict between owners and managers?

Correct Answer
verified

Billy Mac Tailor drives an eighteen-wheeler CG Carriers.He always stops at All Bright truck stops to buy diesel fuel.He is a preferred customer and gets a free meal and shower worth $10.00.But All Bright charges $12.00 more for a fill up than most competitors.Which of the following is true?

Correct Answer
verified

Total agency costs are:

Correct Answer
verified

Which of the following is not a problem in owner-manager or principal-agent conflicts?

Correct Answer
verified

In most models of managerial conflict,the owner is the and the manager is the .

Correct Answer
verified

Which one of the following is a source of conflict between owners and managers?

Correct Answer
verified

While many managers and lawyers might claim that implicit contracts "aren't worth the paper that they are not written on," most understandings between companies and their customers and employees are implicit.Why?

Correct Answer
verified
Repeated interactions and reputations ca...
View Answer

Joan Petty,a human resource manager,offers Billy Self $2,750 per month as an inventory manager.She is willing to offer $750 more per month,but Billy does not have that information and walks away from the job offer.This is an example of a:

Correct Answer
verified

Which one of the following is a big problem in large groups?

Correct Answer
verified

What are some ways of reducing adverse selection in the insurance market?

Correct Answer
verified
Self-selection and signaling may be two ...
View Answer

A firm is a focal point for a set of contracts.Explain the problems that (1)agency relationships,(2)asymmetric information,and (3)adverse selection can introduce to building a successful contract between two people.

Correct Answer
verified
Agency relationships can be exploited wh...
View Answer

It is in the self-interest of individuals to:

Correct Answer
verified

Exam 10: Incentive Conflicts and Contracts

Designing efficient contracts are costly when:

Correct AnswerverifiedShow Answer

An informal understanding about the quality of product components supplied is a key to the relationship between most companies and their suppliers.This is a good example of:

Correct AnswerverifiedShow Answer

Incentive problems in contractual relationships generate:

Correct AnswerverifiedShow Answer

______ makes designing efficient contracts costly.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Kaneshi Hartfield is a sales representative with Plain Truth Advertising.She is an excellent sales representative,but corporate management feels that she is too independent.But they are afraid to act,since Kaneshi maintains her own list of key contacts.This is an example of:

Correct AnswerverifiedShow Answer

Precontractual informational asymmetries that generate contracting costs can lead to

Correct AnswerverifiedShow Answer

Mary Jo Smith is willing to work for $3,200 per month.She asks the HR manager at Plain Truth Advertising for $4,000 per month.He was willing to pay only $3,700 per month,so he rejects her application and begins to search for a new employee again.This is an example of:

Correct AnswerverifiedShow Answer

Which one of the following is a source of conflict between owners and managers?

Correct AnswerverifiedShow Answer

Billy Mac Tailor drives an eighteen-wheeler CG Carriers.He always stops at All Bright truck stops to buy diesel fuel.He is a preferred customer and gets a free meal and shower worth $10.00.But All Bright charges $12.00 more for a fill up than most competitors.Which of the following is true?

Correct AnswerverifiedShow Answer

Total agency costs are:

Correct AnswerverifiedShow Answer

Which of the following is not a problem in owner-manager or principal-agent conflicts?

Correct AnswerverifiedShow Answer

In most models of managerial conflict,the owner is the ______ and the manager is the ______.

Correct AnswerverifiedShow Answer

Which one of the following is a source of conflict between owners and managers?

Correct AnswerverifiedShow Answer

While many managers and lawyers might claim that implicit contracts "aren't worth the paper that they are not written on," most understandings between companies and their customers and employees are implicit.Why?

Correct AnswerverifiedRepeated interactions and reputations ca...View AnswerShow Answer

Joan Petty,a human resource manager,offers Billy Self $2,750 per month as an inventory manager.She is willing to offer $750 more per month,but Billy does not have that information and walks away from the job offer.This is an example of a:

Correct AnswerverifiedShow Answer

Which one of the following is a big problem in large groups?

Correct AnswerverifiedShow Answer

What are some ways of reducing adverse selection in the insurance market?

Correct AnswerverifiedSelf-selection and signaling may be two ...View AnswerShow Answer

A firm is a focal point for a set of contracts.Explain the problems that (1)agency relationships,(2)asymmetric information,and (3)adverse selection can introduce to building a successful contract between two people.

Correct AnswerverifiedAgency relationships can be exploited wh...View AnswerShow Answer

It is in the self-interest of individuals to:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In most models of managerial conflict,the owner is the and the manager is the .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Repeated interactions and reputations ca...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Self-selection and signaling may be two ...
View Answer

Correct Answer
verified
Agency relationships can be exploited wh...
View Answer

Correct Answer
verified