You have owned and managed an independent furniture store for 20 years in the big city. You will now open a 2store in a far away city, you will have to hire a manager for that store. QUESTONS: a) Carefully describe a specific principal-agent problem that can arise in this specific situation b) Carefully describe actions, specific to this example, that you may take now to ameliorate the principal-agent problem that you described in part (a). (Clearly label each answer or you will receive no credit for your answers)

You have owned and managed an independent furniture store for 20 years in the big city. You will now open a 2store in a far away city, you will have to hire a manager for that store. QUESTONS: a) Carefully describe a specific principal-agent problem that can arise in this specific situation b) Carefully describe actions, specific to this example, that you may take now to ameliorate the principal-agent problem that you described in part (a). (Clearly label each answer or you will receive no credit for your answers)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 2MC

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Kirk was a bright individual who was being groomed for the Controller’s position in a medium-sized manufacturing firm. After his first year as Assistant Controller, the officers of the firm were starting to include him in major company functions. For instance, today he was attending the monthly financial statement summary given at a prestigious consulting firm. During the meeting, Kirk was intrigued at how all the financial data he had been accumulating was transformed by the consultant into revealing charts and graphs. Kirk was generally optimistic about the session and the company’s future until the consultant started talking about the new manufacturing plant the company was adding to the current location and the costs per unit of the chemically plated products it produced. At that time, Bob (the President) and John (the chemical engineer) started talking about waste treatment and disposal problems. John mentioned that the current waste facilities were not adequate to handle the…
What is the principal goal of a firm like CorpCo? As a managerial economist how would you define an ‘optimal decision’ for a firm? The firm is considering investing $300,000 for a period of five years. Expected earnings are $50,000 in year 1, $60,000 in year 2, $75,000 in year 3 and $90,000 in years 4 and 5. Should the firm decide to invest, if the interest rate is 8%? The firm paid a dividend of $6 during the past year and it estimates dividends to grow at 7% annually in the future. Firm’s stockholders require a rate of return of 14%. What would be the expected value of each share today? Which are the two basic risks affecting returns when shareholders value any business? Briefly explain.
Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000.i. How much will the hotel charge members of each group for the vacation package if it could identify the members in each group? ii. How much will the profit for AG Travel and Tour be? iii. Since…
Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000. What profit will AG Travel and Tour make if it charges the package pricefound in (v) above?
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Jim has been employed at Gold Key Realty at a salary of $2,000 per month during the past year. Because Jim is considered to be a top salesman, the manager of Gold key is offering him one of three salary plans for the next year: (1) a 25% raise to $2,500 per month; (2) a base salary of $1,000 plus $600 per house sold; or, (3) a straight commission of $1,000 per house sold. Over the past year, Jim has sold up to 6 homes in a month. Write down the month salary payoff table for Jim.
(Alternative Measures of Profit) Calculate the accounting profit or loss as well as the economic profit or loss in each of the following situations: A firm with total revenues of $150 million, explicit cost of $90 million, and implicit costs of $40 million A firm with total revenues of $125 million, explicit cost of $100 million, and implicit costs of $30 million A firm with total revenues of $100 million, explicit cost of $90 million, and implicit costs of $20 million and A firm with total revenues of $250,000, explicit cost of $275,000, and implicit costs of $50,000 please i'd like to see the steps who we get the answers so i understand thank you so much :)
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You are consultant at large international consultancy (“PharmCons”), specialized in consulting firms in the pharmaceutical industry. PharmCons has its Asian-Pacific headquarter in Singapore. Dr. Lee, the CEO of a newly established Singaporean pharmaceutical firm (“SinPharm”), which owns the protected patent for vaccine for Dengue-fever, approaches PharmCons. He is an excellent biologist but he and his employees are not well trained in managerial economics. So he needs advise on how to “make the best out of his patent” in an economic sense. Your colleagues at PharmCons have already estimated the market demand function for the vaccine. The accountancy division of SinPharm provides information with respect to relevant production costs. The (inverse) demand for the vaccine is estimated as P = 301 - 4Q. The marginal costs (MC) are equal to MC = 1 and fixed costs (FC) are equal to FC = 1000. Your boss ask you to provide Dr. Lee answers to the following questions: (a) Is SinPharm a…
You are consultant at large international consultancy (“PharmCons”), specialized in consulting firms in the pharmaceutical industry. PharmCons has its Asian-Pacific headquarter in Singapore. Dr. Lee, the CEO of a newly established Singaporean pharmaceutical firm (“SinPharm”), which owns the protected patent for vaccine for Dengue-fever, approaches PharmCons. He is an excellent biologist but he and his employees are not well trained in managerial economics. So he needs advise on how to “make the best out of his patent” in an economic sense. Your colleagues at PharmCons have already estimated the market demand function for the vaccine. The accountancy division of SinPharm provides information with respect to relevant production costs. The (inverse) demand for the vaccine is estimated as P = 301 - 4Q. The marginal costs (MC) are equal to MC = 1 and fixed costs (FC) are equal to FC = 1000. Your boss ask you to provide Dr. Lee answers to the following questions: (a) Is SinPharm a…