Principles Of Microeconomics (book With Myeconlab With Pearson Etext Access Card)
12th Edition
ISBN: 9780134435039
Author: CASE, Karl E.; Fair, Ray C.; Oster, Sharon E.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 3.1P
To determine
What happens to the organic egg farm when the salary is changed to the piece rate per worker.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Many police officer positions require the applicant to have a college degree, even though the tasks of a police officer rarely call upon college course material.
Suppose two individuals who do not have college degrees are considering applying to the police force. Ginny is considering applying for an officer position and plans on working for the police force for a period of time, over which she would earn approximately $500,000 (in present discounted value) in earnings while in the position. Kenji is also considering applying, and plans on working as an officer for a period of time, over which he would earn approximately $10,000 (in present discounted value) in lifetime earnings while in the position. Also suppose that present value of obtaining a college degree, which is required to submit a job application to the police department, is $100,000.
Use the following table to indicate whether each individual would likely apply, or not, given the cost of obtaining a college degree.…
In Chapter 5 of Managerial Economics, Froeb discusses post-investment holdup as a sunk cost problem associated with contract-specific fixed investments. The modern theory of contracts is sometimes called the theory of joining wills, which simply means when parties make an agreement they are joining together to complete an endeavor of mutual interest. The problem with all contracts that endure over time is that not all potential challenges can be anticipated. The idea of joining wills is that parties will attempt to seek accommodations to advance their mutual interest, so long as the return on the invested activity pays off. Froeb illustrates the idea by the example of marriage as a contract.
Review the three scenarios below. Look for which, if any, of these scenarios presents an example of post-investment holdup.
Your firm conducted a search for a new chief financial officer and hired a highly qualified candidate with a yearly salary of $250,000. After six months, the person left to…
The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that she will buy the company after five years. For the first $150,000 of profit, the vice president's compensation is a flat annual salary of $50,000 plus 60% of company profits. Beyond the first $150,000 in profits, the vice president's compensation is the salary she receives at $150,000 profit plus 10% of company profits in excess of $150,000.
On the following graph, use the purple points (diamond symbols) to plot the vice president's salary as a function of annual profit, for the profits levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000.
Total VP Salary0501001502002503002502252001751501251007550250MANAGER SALARY (Thousands of dollars)ANNUAL COMPANY PROFIT (Thousands of Dollars)300, 210
Chapter 17 Solutions
Principles Of Microeconomics (book With Myeconlab With Pearson Etext Access Card)
Knowledge Booster
Similar questions
- The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that she will buy the company after five years. For the first $150,000 of profit, the vice president's compensation is a flat annual salary of $50,000 plus 60% of company profits. Beyond the first $150,000 in profits, the vice president's compensation is the salary she receives at $150,000 profit plus 10% of company profits in excess of $150,000. On the following graph, use the purple points (diamond symbols) to plot the vice president's salary as a function of annual profit, for the profits levels of $0, $50,000, $100,000, $150,000, $200,000, $250,000, and $300,000arrow_forwardAnswer the following sub-questions using economic theory, the principal agent theory and empirical evidence. Most UK and American CEOs are paid significantly more than the average employee of their firms. Does this fact suggest that CEOs are overpaid? French and German CEOs earn considerably less than US CEOs, does this suggest that US CEOs are overpaid? The firm’s stock market price is uncorrelated with the FTSE100 index. In economic terms, does it make sense to pay the firm’s CEO based on the FTSE100 index? Explain. Taking into account the article by Bebchuk et al “The Wages of Failure”, discuss the advantages and disadvantages of incentive pay and the problems of incentive pay in the case of Bear Stearns and Lehman Brothers. Also discuss reforming incentive pay to deal with the problems unearthed at Bear Stearns and Lehman Brothersarrow_forwardWhile backing out of his driveway, Frank accidentally runs over his neighbor, Jennifer’s mailbox. Jennifer is pretty mad and she claims that Frank is responsible for paying to fix the mailbox. In making this claim, Jennifer is asserting her ____________. Question 24 options: Right to Control Right to Transfer Right to Restitution Right to Contractarrow_forward
- What is the principal-agent problem? Have you ever worked in a setting where this problem has arisen? If so, do you think increased monitoring would have eliminated the problem? Why don’t firms simply hire more supervisors to eliminate shirking?arrow_forwardDistinguish between Factor Price Equalization and the Stolper-Samuelson theory.arrow_forwardExplain the similarities and differences between the assumptions of Specific Factor Theory and the Model Trading Heckscher – Ohlinarrow_forward
- The compensation principle is stated in terms of potential compensation rather than actual compensation. true or falsearrow_forwardApple Corporation requires its top managers to own shares of stock in Apple equal in value to three times their annual salary. Explain what problem Apple is trying to solve with this requirement, and explain whether this requirement does indeed solve the problem.arrow_forwardThe manager of your company’s pension fund is compensated based entirely on fund performance; he earned over $1.2 million last year. As a result, the fund is contemplating a proposal to cap the compensation of fund managers at $100,000. Provide an argument against the proposalarrow_forward
- Billy John Pigskin of Mule Shoe, Texas, has a von Neumann-Morgenstern utility function of the form u(c) = √c. Billy John also weighs about 300 pounds and can outrun jackrabbits and pizza delivery trucks. Billy John is beginning his senior year of college football. If he is not seriously injured, he will receive a $1,000,000 contract for playing professional football. If an injury ends his football career, he will receive a $10,000 contract as a refuse removal facilitator in his home town. There is a 10% chance that Billy John will be injured badly enough to end his career. If Billy John pays $p for an insurance policy that would give him $1,000,000 if he suffered a career-ending injury while in college, then he would be sure to have an income of $1,000,000 − p no matter what happened to him. Write an equation that can be solved to find the largest price that Billy John would be willing to pay for such an insurance policy. Here is my question: Why is Billy's income 1,000,000 - p even…arrow_forwardThis question relates to the form of employment contract between a real estate agent and her real estate agency (like Coldwell-Banker or Century 21). The agency provides the agent with a desk, secretarial and paralegal services, and its reputation for honest dealing. Susan is a real estate agent. Since she is a single mother, she is concerned with the uncertainty associated with her volume of sales. The brokerage contract between the seller (of a home that has been put on the market for sale) and the real estate agent specifies a commission of 6% (payable upon sale). The listing agency presents Susan with two options. She can split her commission earnings 50-50 with the agency or pay an annual franchise fee of $60,000 to the agency and receive the entire commission. The question has two parts. In part A, there is no moral hazard. In part B, there is moral hazard. A.Her expected sales are $3,000,000 with a probability of 0.5 and $1,333,333 with a probability of 0.5. Her utility…arrow_forwardConsider a self employed worker who owns a firm that produces output q which sells for a price of p = 1. Output depends on effort, e, so the production function is q = γe, where γ > 0 is a parameter. Effort reduces utility, and the cost of effort is c(e) = 1 2 e2. Note that there is no principal-agent problem here because the worker is the owner of the firm (and therefore has a claim on all profits), in addition to personally incurring the cost of effort. The self employed worker’s utility is a linear function of revenue net of effort costs, U(e) = q− c(e) = γe− 1 2 e2arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning