Reference no: EM133372734

1. Which mechanism presented in Chapter 6 do you like best to address the manager-worker principal-agent problem? Do you have a better strategy (than the ones mentioned in the textbook) for managers to induce the activities desired of workers? Do you think using cameras and video surveillance in the workplace to monitor employee's performance can be an effective solution to the manager-worker principal-agent problem?

2. A consumer advocate is discussing the airline industry on the news. He says, "There are so many rates offered by airlines that it is technically possible for a 747 to be carrying a full load of passengers where no two of them paid the same price for their tickets. This is clearly unfair and inefficient." He continues, "In addition, the profits of the airlines have doubled in the last few years since they began this practice, and these additional profits are clearly a social burden. We need legislation that requires airlines to charge all passengers on an airplane the same price for their travel." A. List some of the ways airlines divide their customers according to their willingness to pay. B. Is it necessarily inefficient for airlines to charge different prices to different customers? Why or why not? C. Is the increase in profits generated by this type of price discrimination a social cost?

3. Because patterns of comparative advantage can change over time, some producers may find their competitiveness diminishing, especially those who fall behind in research and 2 development, technology, and equipment (same thing applies to individuals). Therefore, producers are under continuous pressure to "reinvest themselves". No producer is able to maintain the world's lowest-cost producer forever, and that producers need to hone their skills to be more competitive in other profitable areas, as comparative advantages change over time. For example, facing high competition from Japan in semiconductor industry, where Japanese companies became dominant in late 1980s, the big U.S. chipmakers had to reinvent themselves (Intel, Motorola, and Texas Instruments abandoned the business of Dynamic Random Access Memory, DRAM, and invested heavily in manufacturing microprocessors), to become an even more dominant player in microprocessors. Another example is related to Nokia dominating the market for cell phones worldwide in late 1990s and early 2000s but lost this dominance due to issues including not investing enough and on time in smart phone technology to compete with Apple and Samsung. Also, Kodak (a multinational imaging and photographic equipment company headquartered in New York) had 85% market share of camera sales and 90% of film sales in the U.S. in 1976. In mid 1990s, its market share for photo film in the U.S. plunged to 75%, because it underestimated the competitiveness of its Japanese rival Fuji Photo Film Co. In 2012, Kodak (the industrial giant that faced global competition and advancing technology) filed for Chapter 11 bankruptcy, as it was running short of cash. Please give a detailed example of a company (or an individual) who lost their comparative advantage over time (and may be went out of business after being the best), or an example of a company that is working hard to reinvent itself to remain highly competitive. What is your advice for a company (or an individual) to remain successful?

4. Do you think robot revolution that is expected to spread more in the near future (due to robots becoming more affordable, efficient, and easier to program) will likely worsen the wage gap between unskilled and skilled workers and also increase unemployment? Please explain your view.