Answer Key For Managerial Economice Baye 5E

Chapter 6: Answers to Questions and Problems 1. When an input has well-defined and measurable quality characteristics and requires nail down investments, the optimal procurement method is a puzzle. A slue reduces the likelihood of opportunistic behavior and underinvestment by creating a levelheaded obligation between the steadys. One dis wages of a contract is that it increases a firms transaction costs. An example, Boeing undertake with an aluminium manufacturer. When a firm requires a limited take of standardized inputs that ar sold by many firms in the marketplace, the optimal method of procurement is piece modify. One advantage of choose deputize is that they permit firms to specialize. A disadvantage is that the firm may potentially face the hold-up problem. An example, a winderer purchasing key from a local paint store. 2. 3. a. Contract. b. Vertical Integration. c. Spot exchange (or possibly contract if a specific investment in many motors is required) . d. Spot exchange. 4. Engine manufacturing involves specific investments and a modify contracting environment. By vertically integrating, the potential for opportunism is reduced. Mirrors ar relatively uniform products that can be purchased by moorage exchange or contract. 5. a. Human capital. b.

Physical asset specificity; pathway that the assembly limit was designed especially for a itch firms product. c. Site specificity. 6. The manager prefers the compensation scheme that pays a fixed salary plus a part of the profits. Essentially, the manager is faced with a choice between jaw consumption bund les: (1) a $125,000 fixed salary plus 10 hou! rs of on-the-job leisure and (2) $125,000 in salary plus dower plus 3 hours of on-the-job leisure. Since the original compensation package of a $125,000 and 10 hours of shirking is still available, the fact that she chose to habituate 7 hours reveals that she prefers the second pay scheme. Managerial Economics and line Strategy, 5e Page 1...If you want to get a full essay, set it on our website: OrderCustomPaper.com

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