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Unformatted text preview: ECOS3003 Tutorial 8 1 Hierarchies, incentives and firm structure ECOS3003 Tutorial 8 1. Which of the following is not required in cost centre performance-evaluation systems? (a) The output must be measurable (b) The quality must be easily observable (c) The optimal input combination must be known when setting goals (d) The optimal output level (or budget) must be known when setting objectives. 2. One problem with measuring revenue centre performance is that if given decision rights over price, revenue maximisation is inconsistent with profit maximisation. One way to resolve the problem may be to charge them for the products they sell. Does this resolve the issue? no, performance evaluation is based on revenue, a manager will continue to maximise revenue. If want to give a manager control over prices as well as quantity, need to reward profit. (note also the possibility of transfer pricing issues). 3. A firm has a demand curve P = 6600 - 10Q. Its total costs are TC = Q 2 . What are the optimal output, price and profits of the firm?...
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This note was uploaded on 11/02/2010 for the course ECOS 3003 taught by Professor Andrewwait during the Three '10 term at University of Sydney.
- Three '10