A factory owner wants his workers to produce as many widgets as they can so he pays his workers based on how many widgets they produce
However, in order to make sure that the workers do not rush and produce a large number of poorly made widgets, he checks the widgets at random at various stages of their manufacture. If a defect is found in a widget, the pay of the entire section of the factory responsible for that defect is docked. How is this factory owner seeking to solve the agency conflict problem in this case?
A) by supplying incentives so the agents act in the way principal desires
B) by ensuring that all workers co-operate to maximize the gains of their section
C) by making the agents into principals themselves
D) by maximizing the information that the principal obtains about the behavior of the agents
Answer: A
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a. Supervise them less closely. b. Give them more responsibility. c. Put them in close contact with fence-sitters. d. Reduce the amount of work assigned to them.
A World Trade Organization (WTO) panel ruled that __________ labeling requirements violated international trade rules.
Fill in the blank(s) with the appropriate word(s).
Which of the following statements are False
a. A variable cost is a cost that, in total, will vary with production. b. A step cost can be either fixed or variable. c. The level of activity that reflects the company's expected operating range is called the budgeted range. d. Depreciation (computed using the straight line method) and insurance are examples of fixed costs.
The process of transferring risk to the capital markets through the use of financial instruments such as bonds, futures contracts, and options is known as
A) consolidation of risk. B) avoidance of risk. C) securitization of risk. D) compartmentalization of risk.