Jensen & Meckling discussion questions
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1. Compare and contrast (2 – 4 sentences) the mechanisms by
which markets and organizations assign decision rights. In other
words, how are decision rights allocated by markets and how are
decision rights allocated by organizations –which features are
similar and which are different?
2. Please give at least two (2) examples of general knowledge
and two (2) examples of specific knowledge for your project
organization (four (4) examples total). Give a brief (1 – 2
sentence) explanation of why you categorize each of these examples
as general or specific. Your examples should be RELEVANT to your
core business process as discussed during the Intro to
Organizational Architecture lecture last week — not just the first
examples that come to mind in order for you to “check the box” on
this assignment.
3. On p. 25 J&M sate that “Minimizing cost of given total
output often seems to degrade into a system where managers are
rewarded for minimizing average cost per unit of output…measuring
performance by average cost per unit of output will virtually never
be consistent with firm value maximization in the absence of a
quantity constraint.” Go back to your intermediate micro section on
costs and production and explain what J&M mean by this
statement. WHY isn’t managing based on average costs optimal?
Please draw a graph of the relevant cost curves to support your
explanation.
4. Please look at the graph on p. 18. Why isn’t the minimum
total organizational costs at the intersection point between the
cost of inconsistent objectives and the cost of poor information?
Hint: This answer is related to our answer in #3 above.
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