• technological efficiency occurs when the firm

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: • Technological efficiency occurs when the firm produces a given output by using the least amount of inputs • Economic efficiency occurs when the firm produces a given output at the least cost • Depends on the relative costs of resources What is information and organization? • A command system is a method of organizing production that uses a managerial hierarchy • Managers always have incomplete information about what is happening in the divisions of the firm for which they are responsible • An incentive system is a method of organizing production that uses a market-like mechanism inside the firm • Firms use commands when it is easy to monitor performance or when a small deviation from an idea performance is costly • Firms use incentives when monitoring performance is either not possible or too costly to be worth doing • The principal-agent problem is the problem of devising compensation rules that induce an agent to act in the best interest of a principal • Coping with the principal-agent problem: ownership, incentive pay, and long-term contracts • Three main types of business organizations: proprietorship, partnership, and corporation • Unlimited liability – the legal responsibility for all the debts of a firm up to an amount equal to the entire wealth of the owner • Joint unlimited liability • Limited liability – owners have legal liability only for the value of their initial investment What are markets and the competitive equilibrium? •...
View Full Document

{[ snackBarMessage ]}

Page1 / 2

• Technological efficiency occurs when the firm produces...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online