Question 1

Making a manager a residual claimant is often a way of

Accepted Answer

Making a manager a residual claimant means that they have a stake in the profits of the firm beyond just their salary. This reduces the incentive for the manager to shirk, as their income is directly tied to the success of the firm. This is a way to increase the efficiency of the firm and ensure that the manager is motivated to work hard and make decisions that will benefit the company.

Question 2

As the marginal physical product of U.S.workers _________________,the marginal cost of goods produced in the U.S.______________ and unit costs _____________. This makes American goods ________________ competitive in the global marketplace.

Accepted Answer

As the marginal physical product of U.S. workers rises, it means they are producing more goods per unit of time, which will lower the marginal cost of production. This will lead to a fall in unit costs, making American goods more competitive in the global marketplace.

Question 3

Working alone,a person who shirks receives __________ the benefits of shirking and pays __________ the costs of shirking.

Accepted Answer

When working alone, a person who shirks receives all the benefits of shirking, such as less work or taking it easy, and also bears all the costs, such as lower output or lower quality of work, since there is no one else to share the workload or consequences.

Question 4

The __________ hand is the metaphor used to refer to market coordination,whereas the __________ hand is the metaphor used to refer to managerial coordination.

Accepted Answer

The invisible hand is a metaphor used by Adam Smith to refer to market coordination in which individuals pursuing their own self-interest can unintentionally benefit society as a whole. On the other hand, managerial coordination is referred to as the visible hand in which managers use their authority and control to coordinate resources and direct them towards achieving the goals of the organization.

Question 5

According to economists Alchian and Demsetz,firms are formed when

Accepted Answer

Alchian and Demsetz's theory of the firm states that firms are formed when the sum of what individuals can produce as a team is greater than the sum of what individuals can produce working alone. This is because there are often economies of scale and specialization that occur when individuals work together as a team, leading to greater productivity and efficiency.

Question 6

The Alchian and Demsetz theory of why business firms exist suggests that

Accepted Answer

The Alchian and Demsetz theory posits that team production can lead to outcomes where the collective output is greater than the sum of what each individual could produce separately, due to synergies and efficiencies gained from working together.

Question 7

Exhibit 22-14
  
Assume that labor is the only variable input.
-Refer to Exhibit 22-14.What is the MPP of the first unit of labor [blank (C)]?

Accepted Answer

The MPP of the first unit of labor is the slope of the total product curve at that point, which in this case is 100 units.

As for the best choice, it would depend on the specific goal or constraint of the firm. If the firm wants to maximize output while minimizing costs, they should choose the quantity of labor where MPP = wage rate (in this case, 400 units of labor). If the firm is constrained by a fixed budget for labor costs, they should choose the output level where the marginal revenue product (MRP) of labor (which equals MPP times price) equals the wage rate. Without knowing more about the goals and constraints of the firm, it is impossible to determine the best choice.

Question 8

Exhibit 22-14
  
Assume that labor is the only variable input.
-Refer to Exhibit 22-14.What is the level of output with 2 and 3 laborers working [blanks (A)and (B)]?

Accepted Answer

The correct answer is A because with 2 laborers working, the output is 175 units, and with 3 laborers working, the output is 225 units.

Question 9

Which of the following is an example of market coordination?

Accepted Answer

The answer of Which of the following is an example...

Question 10

The "visible hand" is a metaphor used to describe

Accepted Answer

The "visible hand" metaphor is often contrasted with Adam Smith's "invisible hand" which refers to how markets can be coordinated through the self-interested actions of individuals. The visible hand, on the other hand, refers to the actions of managers and other visible coordinators within a firm or organization. Therefore, choice B (managerial coordination) is the best answer.

Question 11

Which of the following situations would prompt individuals to try to form a team (firm),according to Alchian and Demsetz.

Accepted Answer

According to Alchian and Demsetz, individuals will try to form a team (firm) when the joint output of working together is greater than the sum of individual outputs working alone. In situation B, the joint output of Jones, Smith, and Brown is 120 units of good X when working together, compared to their combined output of 100 units working alone. This suggests that there are potential gains from coordinating their efforts and forming a team.

Question 12

Economists Alchian and Demsetz suggest that firms are formed when

Accepted Answer

Alchian and Demsetz argue that firms are formed to take advantage of gains from cooperation and specialization, which allow individuals to produce more as a team than they could on their own. This is also known as the theory of the firm's efficiency. Therefore, choice D is the best answer.

Question 13

In the theory of the firm (as put forth by Alchian and Demsetz),trade or exchange pops up in the following situation:

Accepted Answer

The answer of In the theory of the firm (as...

Question 14

Exhibit 22-14
  
Assume that labor is the only variable input.
-Refer to Exhibit 22-14.What is the MPP of the fourth unit of labor [blank (D)]?

Accepted Answer

The MPP of the fourth unit of labor is the marginal product of labor for the fourth unit, which can be read from the graph as approximately 15 units. Therefore, D is the correct answer.

As for the best choice(s), more information is needed about the context of the problem (such as the price of labor and the firm's production function) to determine the optimal level of labor input.

Question 15

Carol works for Firm X.She takes long breaks and often daydreams when she is being paid to work.Carol is

Accepted Answer

Carol is shirking, which means she is not working to her full capacity or taking advantage of paid work time.

Question 16

"Managerial coordination" refers to the

Accepted Answer

Managerial coordination refers to the process whereby managers direct employees to perform certain tasks. It involves communication, collaboration, and cooperation among managers and employees to achieve organizational goals. Managerial coordination is an essential aspect of effective management as it ensures that everyone is working towards the same objectives and that resources are allocated and utilized efficiently.

Question 17

There is a monitorless team (firm)of 10 persons.The 10 persons agree to work together and split the revenue (they earn)equally.In this setting,the cost of shirking to an individual is

Accepted Answer

In a team setting where revenue is split equally, the cost of shirking (not working as hard) for an individual is lower than it would be if the individual worked alone. This is because the individual can reduce their effort but still receive an equal share of the revenue generated by the team, thus spreading the cost of their reduced effort across all team members.

Question 18

Shirking,being a form of __________,is a good that individuals may consume more of the __________ its cost.

Accepted Answer

The answer of Shirking,being a form of __________,is a good...

Question 19

In a college course it is likely that there will be ___________ shirking in a group project than in an individual project because the costs of shirking are relatively _________ in the group project.

Accepted Answer

In a group project, there is a possibility of free riding or shirking by a team member as the effort of others will cover up the lack of effort by the shirker. Hence, the costs of shirking are relatively lower in a group project as compared to an individual project where the whole responsibility lies on the individual. Therefore, there is a higher chance of shirking in a group project.

Question 20

Economists predict that the __________ the cost of shirking to an individual,the __________ shirking that individual will undertake,ceteris paribus.

Accepted Answer

The correct answers are B) higher; less and C) lower; more. This is because when the cost of shirking (avoiding work) is higher, individuals are less likely to shirk due to the higher penalties or consequences. Conversely, when the cost is lower, individuals are more likely to shirk since the penalties or consequences are less severe.

Quiz 22: Production and Costs

Making a manager a residual claimant is often a way of

As the marginal physical product of U.S.workers _________,the marginal cost of goods produced in the U.S. and unit costs _. This makes American goods __________ competitive in the global marketplace.

Working alone,a person who shirks receives the benefits of shirking and pays the costs of shirking.

The hand is the metaphor used to refer to market coordination,whereas the hand is the metaphor used to refer to managerial coordination.

According to economists Alchian and Demsetz,firms are formed when

The Alchian and Demsetz theory of why business firms exist suggests that

Exhibit 22-14 Assume that labor is the only variable input. -Refer to Exhibit 22-14.What is the MPP of the first unit of labor [blank (C) ]?

Exhibit 22-14 Assume that labor is the only variable input. -Refer to Exhibit 22-14.What is the level of output with 2 and 3 laborers working [blanks (A) and (B) ]?

Which of the following is an example of market coordination?

The "visible hand" is a metaphor used to describe

Which of the following situations would prompt individuals to try to form a team (firm) ,according to Alchian and Demsetz.

Economists Alchian and Demsetz suggest that firms are formed when

In the theory of the firm (as put forth by Alchian and Demsetz) ,trade or exchange pops up in the following situation:

Exhibit 22-14 Assume that labor is the only variable input. -Refer to Exhibit 22-14.What is the MPP of the fourth unit of labor [blank (D) ]?

Carol works for Firm X.She takes long breaks and often daydreams when she is being paid to work.Carol is

"Managerial coordination" refers to the

There is a monitorless team (firm) of 10 persons.The 10 persons agree to work together and split the revenue (they earn) equally.In this setting,the cost of shirking to an individual is

Shirking,being a form of ,is a good that individuals may consume more of the its cost.

In a college course it is likely that there will be ___ shirking in a group project than in an individual project because the costs of shirking are relatively _ in the group project.

Economists predict that the the cost of shirking to an individual,the shirking that individual will undertake,ceteris paribus.