ECON 5313 Introduction Of Managerial Economics


1. A.What is XCO’s intent with these policies (customer service vs service technician) assuming they want shareholder return as high as possible?

B.Given the arrangements described above, what are the actual incentives X Co has created, Vis a Vis the Rational Actor Paradigm, for customer service employees and service technicians? Describe the behavior(s) you expect to observe when studying the customer service and service technician departments.  

C.Given your answer to B, how is the profit and loss statement affected, in terms of the bottom line, in relation to XCOs stated corporate objective for shareholders. 

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D.What do you intend to do about the problem? Explain how you will end the perverse incentives of the arrangement? 

2. It is now your turn to speak at the meeting.   What is your answer?   Do these arguments make any economic sense?  How will you proceed?  You begin to think, what have I learned in class that will help me out here . . . ? 

Well, with all this in mind your task is: 

A.What is the issue(s) here in these scenario? 

B. Clearly we have inefficiency here, but why and what is the source? What mistake(s) did management make to cause them to shut the plant down? 

C.What would be my advice to solve the matter(s) so this Company does not repeat the same mistakes and have sell another plant at a loss?  

The keys to this statement are contained in the part underlined above. 

A.Please explain in a straightforward way the relationship between the underlined part and supernormal returns (excess economic profit)? 

B. What nonreproduceable advantages are being referred to here?  

C. Which is more important for nonreproduceable advantage (sustainable competitive advantage) intangible or tangible assets and why? 

D.Given your answers above,  does the statement apply to all Corporations,  or just ones in certain industries?