Explain why a firm may hire managers to operate outlets near the firm's headquarters, but may sell franchise rights for the outlets located greater distances from the headquarters. (With a franchise, the firm sells a brand name and a method of doing business to someone who then owns and operates the outlet.)
What will be an ideal response?
To avoid moral hazard problems, the firm must monitor the managers of the outlets. The firm can cost-effectively monitor operations near the headquarters. However, the cost of monitoring rises the farther away the outlet is located. Thus, the firm may earn more profit by franchising the outlets located far from the headquarters instead of trying to monitor them.
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If your nominal income is $80,000 and your real income in base year prices is $71,500, what is the CPI?
A) 106 B) 150 C) 112 D) 100 E) 89
Lee, J Brand, Joe's Jeans, Paper Denim & Cloth, Levi's, Wrangler, and many others are all producers of jeans. J Brand jeans sell for $200 a pair
Suppose at the short-run profit maximizing quantity, J Brand's ATC was $180 and AVC was $100, which statement is TRUE? A) J Brand will produce in the short and long run. B) J Brand will produce in the short run but go out of business in the long run. C) J Brand will shut down in the short run and go out of business in the long run. D) J Brand will produce in the short run and shut down in the long run.
When generic drugs enter the market after the patent for a brand name drug expires, the price of the brand name drug often increases. This is usually due to
A) the demand curve for the brand name drug shifting in but becoming more inelastic. B) the demand curve for the brand name drug not shifting, but the marginal cost of producing the good increases. C) the demand curve for the brand name drug shifting in but becoming more elastic. D) the demand curve for the brand name drug not shifting, but loyal customers are willing to pay a higher price for the brand name drug.
The rules of the GATT
a. apply only to domestic trade within a nation b. apply to both domestic trade within a nation and international trade with other nations c. apply only to trade among nations d. prohibit tariffs e. encourage high tariffs