In the presence of asymmetric information, a hire contract A) achieves production efficiency. B) can lead to opportunistic behavior on the part of the agent. C) is impossible to write. D) will result in the principal earning all of the profit. ANSWER B
Date: September 9th, 2020
In the presence of asymmetric information, a piece-rate contract A) achieves production efficiency. B) can lead to agents producing more output than would occur under a fixed-rent-paid-to-the-principal contract. C) is impossible to write. D) will result in the principal earning all of the profit. ANSWER B
Date: September 9th, 2020
The market demand for MP3 players is p = 50 – 0.5Q, and the marginal cost for an MP3 player is $10. If Nick receives 60% of the total profit, then A) Nick will produce 50 MP3 players. B) Nick receives $500 as profit. C) total profit is $800. D) the efficiency in production is […]
Date: September 9th, 2020
The market demand for MP3 player is p = 50 – 0.5Q, and the marginal cost for Nick to obtain and sell a MP3 player is $10. If he receives $12 for each MP3 player he sells from the store owner and the store owner controls the quantity of MP3’s available for sale, then A) […]
Date: September 9th, 2020
With full information, any contract will lead to production efficiency. Indicate whether the statement is true or false ANSWER False. A hire or revenue sharing contract will not provide the incentives for the agent to maximize joint profit.
Date: September 9th, 2020
Jacko’s rock band is putting out a new CD with its music label. The contract between the band and the label specifies that the band receive 25% of the gross revenues plus another $10,000 up front. The record label projects the demand for the album p = 50 – 0.003Q where p is the price […]
Date: September 9th, 2020
Refer to the production function. The marginal product at 5 units equals ________ units. Fill in the blank(s) with correct word ANSWER To obtain the marginal product at 5 units, take the first derivative and substitute 5 for X Y = 10X + 20X2 – X3 dy/dx = 10 + 40(X) – 3X2 = […]
Date: September 9th, 2020
Refer to the production function. The average product at 5 units equals ________ units. Fill in the blank(s) with correct word ANSWER To get the average product, divide the total product equation by X and substitute 5 for X Thus the average product equation becomes: If Y = 10X + 20 X2 – X3 […]
Date: September 9th, 2020
If the total cost of producing one unit of the output is $100 and the marginal cost of that unit is $20, the average fixed cost of producing two units of output is ________. Fill in the blank(s) with correct word ANSWER $40 Marginal cost = Variable cost ; As we are producing only […]
Date: September 9th, 2020
When the production of a worker is relatively easily observable, the firm can pay a piece-rate. Indicate whether the statement is true or false ANSWER True . A firm needs to measure the output of a worker to be able to pay him according to his production. When this is easy, piece-rates are more […]
Date: September 9th, 2020
