The problem of production in multi-plant firms with asymmetric information can be solved by paying the manager
A) a piece rate, some constant amount per unit of output produced.
B) a larger amount for each unit than was paid for the previous unit, to reflect increasing marginal cost.
C) a smaller amount for each unit than was paid for the previous unit, to reflect decreasing marginal revenue.
D) an annual bonus that increases with each unit of output up to capacity, and decreases with each unit of output past capacity.
E) an annual bonus that is calculated decreases with each unit of output up to capacity, and increases with each unit of output past capacity.
Question 2
The cartel of oil-producing nations (OPEC) once controlled about 80 of the world petroleum market, but OPEC's market share has declined to about half of its former level. This outcome is a good example of how firms may have:
A) relatively high short-run monopoly power that strengthens in the long run.
B) relatively high short-run monopoly power that declines in the long run.
C) relatively low short-run monopoly power that strengthens in the long run.
D) relatively low short-run monopoly power that declines in the long run.
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Plant
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