Question1Discussion Questions

Every time we have to make a choice we are faced with an opportunity cost. Using an example in your professional life identify a situation where you were presented with a choice, the opportunity cost of the choice you made and the process you used to make your choice. As part of your discussion explain whether or not responsible stewardship played a role in your choice. Remember to use the appropriate economic concepts and terminology that are applicable to your answer.

2

What factors must a firm consider when deciding to raise or lower its price? In answering this question think about the content in Chapters 4 and 5 and use a real-world example that helps illustrate your answer.

3

View the video at the link below and share your thoughts on the economic concepts that you believe are applicable. In your response provide a rationale on whether or not a firm has to possess market power in order to raise prices.

If a firm has created value is it also always able to capture that value? How does a firm create value and then what must it be able to do to capture that value? In your answer provide an example of a firm that has been able to create value. Then discuss whether or not you believe it has captured that value and if so how it was captured and if not why it was not able to do so.

5

Identify an incentive conflict in your firm, or one you have read about, that reduced firm value. As part of your answer discuss whether or not one or more of the legs of the organizational stool was unbalanced, and if so, how that contributed to the conflict.

Should decision management and decision control be separated? As part of your discussion, provide a real-world example (or provide a fictitious example) of a firm where the control (correctly) resides with the same individual as well as an example of a firm where the control is (correctly) separated.

7

W. Edwards Deming, often referred to as the leading quality guru in the United States, and psychologist Alfie Kohn support the idea that incentive pay is not a motivator for individuals to do a good job. Yet economists argue that incentive compensation does work and as economist George Baker notes in his 1993 article in the Harvard Business Review titled “Rethinking Rewards,” “The problem is not that incentives can’t work but that they work too well.” What does Baker mean? Discuss the importance of a well-developed compensation plan in attracting and retaining good employees and how to keep those plans from “working too well.”

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