Question

1.

Statement 1: "Franchising can be an excellent way for corporate headquarters to get a franchisee to put in the amount of effort they desire. This approach is often limited in use if the franchise faces enormous uncertainty about the profit the franchise will earn."

Statement 1: "Franchising is difficult to use when the contribution to profit of an individual employee is impossible to measure."

Group of answer choices

Both statements are false.

Statement 1 is true, but 2 is false

Statement 2 is true, and 1 is false

Both statements are true

2.

Statement 1: "It is more expensive on average for the firm to use incentive pay, such as a commission paid to sales representatives, rather than to pay straight salary."

Statement 2: "If the connection between employee effort and the incentive reward paid by the boss in an incentive pay scheme is very strong, then incentive pay is always a good idea."

Group of answer choices

Statement 2 is true, and 1 is false

Statement 1 is true, but 2 is false

Both statements are true

Both statements are false.

3.

Statement 1: "Paying people on the spot market is a type of career earnings hiring."

Statement 2: "With 'efficiency wages' harder working--more efficient-- workers get paid more."

Group of answer choices

Both statements are false.

Statement 1 is true, but 2 is false

Both statements are true

Statement 2 is true, and 1 is false

Answer 1

1> Both statements are true

Franchise is a good contract when the headquarter can control the effort and have an idea what will be the approximate profit. Also, if it is not known what is the measure of of an employee's effort, the employee can shark, thus it leads to a failure of franchise.

2> Statement 2 is true, and 1 is false

If the correlation between extra pay and incentives are strong, then providing incentive is a good idea. Since it makes employee work harder, the net benefit is positive, so it is not expensive for the employer.

3> Statement 2 is true, and 1 is false

Since career earning pays off at a late stage and in case of spot market payment, it is paid immediately, they are not comparable. Also, hard working, more efficient workers will have a higher marginal return and thus they will be paid more in efficiency wage.