The Organization of the Firm

According to Chapter 6, what is the term for a situation where a firm produces the inputs required to make its final product, shunning other suppliers?

What is a key disadvantage of acquiring inputs through contracts as mentioned in the textbook?

What type of specialized investment is exemplified by an electric power plant locating close to a coal mine to minimize transportation costs?

The 'hold-up problem' arises from what characteristic of a specialized investment?

In the General Motors-Fisher Body case described in Inside Business 6-3, what was the initial method of input procurement for car bodies?

What happens to the optimal contract length when the level of specialized investment required to facilitate an exchange increases?

What is the primary reason the principal-agent problem emerges when ownership is separated from control in a firm?

In Table 6-1, if a manager is paid a fixed salary of 50,000 dollars, what is the profit-maximizing number of hours for the manager to shirk?

According to Table 6-2, if a manager's compensation is 10 percent of gross profits, what is the manager's compensation if they shirk for 3 hours?

Which of the following is NOT listed as an external force that provides managers with an incentive to maximize profits?

What is a primary problem with revenue-sharing incentive schemes for workers, such as paying sales commissions?

According to the study by Masten, Meehan, and Snyder mentioned in Inside Business 6-1, what was the average increase in transaction costs from mistaken integration (producing internally a component that should have been purchased)?

In Demonstration Problem 6-2, why is Jiffyburger not protected from opportunism when using spot exchange for its ground beef supply?

A situation where capital equipment is designed to meet the needs of a particular buyer and cannot be readily adapted for other buyers is an example of:

What is the optimal input procurement method when specialized investments are not substantial?

What is a primary disadvantage of vertical integration as a method for procuring inputs?

In the context of the manager-worker principal-agent problem, what is the key feature of a piece-rate compensation system?

According to the study by Paul Joskow on coal contracts mentioned in Inside Business 6-2, by how many years did site specificity increase the average length of contracts between coal mines and electric utilities?

Which of the following is an example of an informal relationship between a buyer and seller where neither party is obligated to specific terms for exchange?

What is the term for costs associated with acquiring an input that are in excess of the amount paid to the input supplier?

Under what condition does the optimal contract length, L star, occur according to Figure 6-2?

What is the primary trade-off a firm faces when choosing to produce an input internally (vertical integration) versus purchasing it from an external supplier?

Why would a firm use time clocks and spot checks in the workplace?

According to the appendix on page 232, a fixed salary of 50,000 dollars for a manager creates an opportunity set that is what shape in the income-shirking graph?

What is the primary purpose of a manager engaging in spot checks of the workplace?