Question

1. According to Fredrick Taylor, creator of "Taylorism" or "Scientific Management," the best way to control shirking was to

a. pay wages higher than prevailing market wages so employees will take care not to quit their job with the company

b. create residual claimants

c. pay workers piece rate wages

d. have supervisors closely watch and monitor workers

e. instill a strong motivation in workers to do their best

2. Following its near bankruptcy in 1922, General Motors pioneered the decentralized management structure in which the firm was reorganized into semi-independent profit centers. Vice-presidents were appointed to manage these profit centers and were told that their bonuses would depend on the profitability of their division. This reorganization was designed to

a. reduce management costs
b. better capture economies of scale
c. create a more centralized management system
d. decentralize decision making and create residual claimants
e. put managerial compensation on a "piece rate" basis

3. What happens to a firm if its economic profits = 0?

a. It will immediately go out of business

b. It will eventually go out of business

c. It will be earning an accounting profit that is normal

d. Other firms will enter the industry and take profits even lower for all

e. Its profits will rise as other firms in this industry will quickly get out of this industry

Answer 1