Managerial economics problem set

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1. A firm leases manufacturing equipment to customers for a 5 year period. At the end of the 5 years customers can buy the equipment at the residual value, which is 40% of the original purchase price. If customers do not buy the equipment the firm sells it at auction. On average, they lose $6,000 on each piece of equipment. What can they do differently to either breakeven or profit on auction sales? Base you answer on adverse selection or any of the other reading for this week.

2. Your firm has hired you to write a detailed memo on how companies can construct workplaces where the most beneficial option for the company is to work in the best interest of its employees and the most beneficial option for the employees is to work in the best interest of the company. Base your memo on chapter 21 from the book, along with other relevant material from this week.

3. You own a firm with multiple divisions and are considering two bonus systems. One is based on how division performance compares to other divisions within the firm. The other is based on how the entire firm performs in comparison to other firms. Discuss the advantages and disadvantages of each and choose one - with a clear explanation of why.

Reference no: EM132553117

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