The Alchian–Demsetz theory of firm.

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Answer 1

Question

Chapter 22, Problem 1VQP

To determine

The Alchian–Demsetz theory of firm.

Expert Solution & Answer

Explanation of Solution

This theory was developed by the economists Armen Alchian and Harold Demsetz. They suggest that a firm is formed by a group of people who are working together. The productivity of this group of people is more than that of an individual’s production. One of the important problems associated with this group work is that the tendency to reduce the agreed effort by the participants, while the accurate intervention of the monitor or the manager reduces this problem to an extent. That is, the monitor rewards efficient workers and punishes idlers. This would help the monitor to preserve the team’s benefits and reduce the monitor’s incentive to shirk.

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Answer 2

Question

Chapter 22, Problem 1VQP

To determine

The Alchian–Demsetz theory of firm.

Expert Solution & Answer

Explanation of Solution

This theory was developed by the economists Armen Alchian and Harold Demsetz. They suggest that a firm is formed by a group of people who are working together. The productivity of this group of people is more than that of an individual’s production. One of the important problems associated with this group work is that the tendency to reduce the agreed effort by the participants, while the accurate intervention of the monitor or the manager reduces this problem to an extent. That is, the monitor rewards efficient workers and punishes idlers. This would help the monitor to preserve the team’s benefits and reduce the monitor’s incentive to shirk.

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Answer 3

Question

Chapter 22, Problem 1VQP

To determine

The Alchian–Demsetz theory of firm.

Expert Solution & Answer

Explanation of Solution

This theory was developed by the economists Armen Alchian and Harold Demsetz. They suggest that a firm is formed by a group of people who are working together. The productivity of this group of people is more than that of an individual’s production. One of the important problems associated with this group work is that the tendency to reduce the agreed effort by the participants, while the accurate intervention of the monitor or the manager reduces this problem to an extent. That is, the monitor rewards efficient workers and punishes idlers. This would help the monitor to preserve the team’s benefits and reduce the monitor’s incentive to shirk.

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Answer 4

Question

Chapter 22, Problem 1VQP

To determine

The Alchian–Demsetz theory of firm.

Expert Solution & Answer

Explanation of Solution

This theory was developed by the economists Armen Alchian and Harold Demsetz. They suggest that a firm is formed by a group of people who are working together. The productivity of this group of people is more than that of an individual’s production. One of the important problems associated with this group work is that the tendency to reduce the agreed effort by the participants, while the accurate intervention of the monitor or the manager reduces this problem to an extent. That is, the monitor rewards efficient workers and punishes idlers. This would help the monitor to preserve the team’s benefits and reduce the monitor’s incentive to shirk.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 22, Problem 1VQP

To determine

The Alchian–Demsetz theory of firm.

Expert Solution & Answer

Explanation of Solution

This theory was developed by the economists Armen Alchian and Harold Demsetz. They suggest that a firm is formed by a group of people who are working together. The productivity of this group of people is more than that of an individual’s production. One of the important problems associated with this group work is that the tendency to reduce the agreed effort by the participants, while the accurate intervention of the monitor or the manager reduces this problem to an extent. That is, the monitor rewards efficient workers and punishes idlers. This would help the monitor to preserve the team’s benefits and reduce the monitor’s incentive to shirk.

Answer 6

Chapter 22, Problem 1VQP

To determine

The Alchian–Demsetz theory of firm.

Expert Solution & Answer

Explanation of Solution

This theory was developed by the economists Armen Alchian and Harold Demsetz. They suggest that a firm is formed by a group of people who are working together. The productivity of this group of people is more than that of an individual’s production. One of the important problems associated with this group work is that the tendency to reduce the agreed effort by the participants, while the accurate intervention of the monitor or the manager reduces this problem to an extent. That is, the monitor rewards efficient workers and punishes idlers. This would help the monitor to preserve the team’s benefits and reduce the monitor’s incentive to shirk.

Answer 7

Chapter 22, Problem 1VQP

To determine

The Alchian–Demsetz theory of firm.

Answer 8

Expert Solution & Answer

Explanation of Solution

This theory was developed by the economists Armen Alchian and Harold Demsetz. They suggest that a firm is formed by a group of people who are working together. The productivity of this group of people is more than that of an individual’s production. One of the important problems associated with this group work is that the tendency to reduce the agreed effort by the participants, while the accurate intervention of the monitor or the manager reduces this problem to an extent. That is, the monitor rewards efficient workers and punishes idlers. This would help the monitor to preserve the team’s benefits and reduce the monitor’s incentive to shirk.