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Which of the following examples is an adverse-selection problem and which is an incentive problem? Explain why. In each case, give one method that the restaurant might use to reduce the problem.
a. A restaurant decides to offer an all-you-can-eat buffet that is sold for a fixed price. The restaurant discovers that the customers for this buffet are not its usual clientele. Instead, the customers tend to have big appetites. The restaurant loses money on the buffet.
b. A restaurant owner hires a manager who promises to work long hours. When the owner is out of town, the manager goes home early. This action results in lost profits for the firm.
One firm pays its salespeople on a commission basis, whereas the other firm pays its salespeople fixed salaries. Do you think that one of the two companies is making a mistake? Explain.
You can either spend spring break working at home in Alabama for $200 per day for 5-days, or you can spend the week in Costa Rica where travel expenses will total $700.
1. What is meant by hysteresis when applied to unemployment?2. How do you account for this phenomenon in the 1980s?
Can you think of a recent example where you had to evaluate the incremental costs and benefits of different options in order to make a decision?
The implication is that transferring the formal political and economic rules of successful Western market economies to third-world and Eastern European economies is not a sufficient condition for good economic performance. Privati-z..
Suppose a business experiences a sudden increase in its fixed costs. For example, suppose property taxes increase dramatically. What impact, if any, will this have on the following:
Operations Decision
Payments under some retirement plans are based on the average earnings in the last few years of employment. Discuss the potential incentive effects of this policy.
1.How is the market price of land related to its productivity?
A corporation requires $500,000,000 to finance a major project in the firm. The company is expected to generate a total of $80,000,000 in earnings next year with the addition of this project.
case - cost strcture and pricing sting ray poolvac inc. manufactures and sells a single product called the sting
1.A firm will always prefer to make more profit rather than less. Do you agree with this statement?
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