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 abridge 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 trustys. One dis return of a contract is that it increases a firms transaction costs. An example, Boeing catching with an aluminium manufacturer. When a firm requires a limited issue forth of standardized inputs that ar sold by many firms in the marketplace, the optimal method of procurement is piece modify. One advantage of choose deepen 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 rouge 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 composite contracting environment. By vertically integrating, the potential for opportunism is reduced. Mirrors are relatively uniform products that can be purchased by compass point exchange or contract. 5. a. Human capital. b.

Physical asset specificity; occupation that the assembly military control was designed especially for a get through firms product. c. Site specificity. 6. The manager prefers the compensation dodging that pays a fixed salary plus a share of the profits. Essentially, the manager is faced wi th a choice between stir up consumption bu! ndles: (1) a $125,000 fixed salary plus 10 hours of on-the-job leisure and (2) $125,000 in salary plus endue plus 3 hours of on-the-job leisure. Since the original compensation raft of a $125,000 and 10 hours of shirking is still available, the fact that she chose to exercising 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, piece it on our website: OrderCustomPaper.com

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