MBA Econ Ch.1 Quiz (FROEB)

Asking each of the following questions is useful for isolating the source of managerial problems, except:

Who is making the decision? Does the decision-maker have enough information to make a good decision? Does the decision-maker have the incentive to make a good decision? D. Is the organization profitable?

When considering the organizational design implications of a mistaken decision, the goal is to

learn how to identify similar mistakes in the future after they occur. identify bad decisions simply as the presence or absence of a specific behavior or system. simply reverse bad decisions. D. alter the decision-making process to avoid similar mistakes in the future.

Tips to help solve managerial problems include

not worrying if the goals of the organization and the decision maker are aligned. not worrying if the organization is feeding incorrect information to the decision maker. C. thinking about solutions that get the decision maker to further the organization's goals. considering only the decision maker's point of view.

The rational-actor paradigm does NOT assume that people behave

selfishly. rationally. C. creatively. optimally.

The rational-actor paradigm is useful for

teaching us to anticipate opportunistic behavior. designing organizations that are less susceptible to opportunistic behavior. C. all of these choices. analyzing behavior that has already occurred.

Subjects related to managerial economics that have come up on actual job interview questions (according to the end of chapter 1) include

transfer pricing. sunk costs. C. all of these subjects. signaling in compensation offers.

Why might a 'bonus cap' for executives be a bad policy?

A. It might discourage work effort once the cap is reached. It would sow discontent among lower-level salaried employees. It isn't, because executives should be paid a lower salary to reduce inequity across employees. It creates disincentives to work until the cap is reached.

The possible solutions to managerial problems include all of the following except

A. assigning the decision making responsibilities to someone else. B. changing the current decision maker's work location. C. changing the current decision maker's incentives. D. giving more information to the current decision maker. B.

When assessing the trade-offs involved in changing organizational design,

A. costs include having to restructure how business is conducted. there are only benefits, with no costs. costs include having a better decision-making process. benefits include having to restructure how business is conducted.

A strategy by an auto repair shop to recommend unnecessary repairs

A. will backfire if this becomes public knowledge. will not occur, because repair shops lack the incentive to pursue this strategy. is unlikely to occur, based on the amount of relevant information known by car owners compared with mechanics. usually is the result of insufficient information on the part of the mechanics.