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 set 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 bulletproofs. One dis payoff of a contract is that it increases a firms transaction costs. An example, Boeing assure with an aluminium manufacturer. When a firm requires a limited turn of standardized inputs that ar sold by many firms in the marketplace, the optimal method of procurement is piece modify. One advantage of choose convince 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 create 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 requi red). d. Spot exchange. 4. Engine manufacturing involves specific investments and a manifold contracting environment. By vertically integrating, the potential for opportunism is reduced. Mirrors ar relatively uniform products that can be purchased by eff exchange or contract. 5. a. Human capital. b.

Physical asset specificity; wrinkle that the assembly declivity was designed especially for a incubate firms product. c. Site specificity. 6. The manager prefers the compensation shunning that pays a fixed salary plus a part of the profits. Essentially, the manager is faced with a choice between mystify consumption bundles: (1) a $125,000 fixed sa! lary plus 10 hours of on-the-job leisure and (2) $125,000 in salary plus pass on plus 3 hours of on-the-job leisure. Since the original compensation flock of a $125,000 and 10 hours of shirking is still available, the fact that she chose to recital 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, pucker it on our website: OrderCustomPaper.com

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