Managerial Economics and Organizational Architecture 5th edition James Brickley, Jerold Zimmerman, Clifford W. Smith Jr - Solutions

Locust Hill Golf Club is a private country club. It charges an initiation fee of $23,000. When members quit the club, they receive no refund on their initiation fees. They simply lose their membership. Salt Lake Country Club is also a private golf course. At this club, members join by buying a
The guide at the Washington Monument tells your 10-year-old nephew, "Enjoy the monument. As a citizen you are one of its owners." Your nephew asks you if that is true. What do you say?
In certain professional sports, team owners "own" the players. Owners can sell or trade players to another team. However, players are not free to negotiate with other team owners on their own behalf. The team owners initially obtain the rights to players through an annual draft that is used to
a. What are contracting costs? b. Give a few examples of contracting costs? c. What effect does the existence of contracting costs have on market economies?
Evaluate the following statement: Using free markets and the price system always results in a more efficient resource allocation than central planning. Just look at what happened in Eastern Europe.
What is the difference between general and specific knowledge? How can specific knowledge motivate the use of decentralized decision making?
a. What is an externality? b. Why might externalities lead a firm to discharge too much pollution into a river? c. Congress has passed a law that limits the level of cotton dust within textile factories. Why might a textile firm allow too much cotton dust within its workplace?
What do you think will happen to the price and quantity of DVD players if: a. The availability of good movies to play on DVD players increases? b. Personal income increases? c. The price of inputs used to produce DVD players decreases? d. Ticket prices at local movie theaters
Many economists favor free trade between nations. They argue that free trade will increase total world output and make people of trading nations better off. Discuss how this argument relates to concepts presented in this chapter.
Twin brothers, Tom and Bill, constantly fight over toys. For instance, Tom will argue it his turn to play with a toy, while Bill argues it is his turn. Their parents frequently have to intervene in these disputes. Their mom has conceived an idea that might reduce these conflicts. In particular,
What is a property right? What role do property rights play in a market economy?
What is Pareto efficiency? Why do economists use this criterion for comparing alternative economic systems?
Accounting problems at Enron ultimately led to the collapse of the large accounting firm Arthur Andersen. When the Enron scandal first became public, Andersen’s top management blamed one “rouge partner” in the Houston office who they claimed was less honest than other partners at the firm.
Jenny is an investor in the stock market. She cares about both the expected value and standard deviation of her investment. Currently she is invested in a security that has an expected value of $15,000 and a standard deviation of $5,000. This places her on an indifference curve with the following
Discuss the following statement: “Sunk costs matter. People who pay $20,000 to join a golf club play golf more frequently than people who play on public golf courses.”
Some states in the U.S. allow citizens to carry handguns. Citizens can protect themselves in the case of robberies by using these guns. Other states do not allow citizens to carry handguns. Criminals, however, tend to have handguns in all states. Use economic analysis to predict the effects of
The Japanese are very good at returning lost property to local police stations. If you lose a wallet filled with cash in Japan it is likely to be turned into the police. This is true even though the person finding it could keep it without anyone else knowing. This behavior is not what you would
People give to charity. a. Is this action consistent with the “economic view of behavior”? Explain. b. Suppose that there is a big drop in charitable giving. At the same time there has been no decline in per capita income or total employment. Using the economic model, what potential
Suppose that an investment can yield three possible cash flows: $5,000; $1,000; or $0. The probability of each outcome is 1/3. a. What is the expected value and standard deviation of the investment? b. How much would a risk-neutral person be willing to pay for the investment? c. How
If markets are so wonderful, why do firms exist?
Several school districts have attempted to increase teacher productivity by paying teachers based on the scores their students achieve on standardized tests (administered by outside testing agencies). The goal is to produce higher quality classroom instruction. Do you think that this type of
One of the main tenets of economic analysis is that people act in their own self interest. Why then do people leave tips in restaurants? If a study were to compare the size of tips earned by servers in restaurants on interstate highways with those in restaurants near residential neighborhoods, what
Critically evaluate the following statement: “Risk-averse people never take gambles.”
One physician who worked for a large health maintenance organization was quoted as saying: One day I was listening to a patient's heart and realized there was an abnormal rhythm. My first thought was that I hoped that I did not have to refer the patient to a specialist. Indeed, HMO physicians
Insurance companies have to generate enough revenue to cover their costs and make a normal profit — otherwise, they will go out of business. This implies that the premiums charged for insurance policies must be greater than the expected payouts to the policyholders. Why would a person ever buy
Employees in a plant in Minnesota are observed to be industrious and very productive. Employees in a similar plant in Southern California are observed to be lazy and unproductive. Discuss how alternative views of human behavior and motivation might suggest different explanations for this observed
a. Briefly describe the five models of behavior presented in this chapter. b. What are the implications of these models for managers attempting to influence their employees' behavior?
Suppose that Bob’s indifference curves are perfectly L-shaped with the right angle occurring when Bob has equal amounts of both goods. What does this imply about Bob’s willingness to trade one good for the other? Give examples of goods where this type of behavior might be expected?
Suppose that Bob’s indifference curves are straight lines (as opposed to being convex to the origin). What does this imply about Bob’s willingness to trade one good for the other? Give examples of goods where this type of behavior might be expected?
Suppose that you have $900 and what to invest the money for one year. There are three existing options. (a) The city of Rochester is selling bonds at $90 per unit. The bonds pay $100 at the end of one year when they mature (no other cash flows). (b) Put the money under your
The Solace Company has an inventory of steel that it originally purchased for $20,000. It currently has an offer to sell the steel for $30,000. Should Solace’s management agree to sell? Explain.
A noted economist was asked what he did with his “free time.” He responded by saying that “time is not free.” Explain this response.
Which costs are pertinent to economic decision making? Which costs are not relevant?
In the life insurance industry, we see two major ownership structures—common stock insurers and mutual insurers. In the common stock companies, the owners —its stockholders—are a separate group from its customers—the policyholders. In a mutual, the policyholders are also the owners of the
In the process of benchmarking, a colleague of yours notes that Lincoln Electric, a producer of electric arc welders, has much high er productivity than does your company. Unlike your firm, Lincoln has an ext ensive piece-rate compensation system; much of its employees’ total compensation is
What are the three aspects of organizational architecture?

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