1. Which of the following is NOT an implication of specialized investments that lead to increased transaction costs?

Underinvestment in specialized investment

Incentive contracts

Costly bargainig

Opportunism and the hold-up problem

2. Piece rates are typically a solution to the:

None of the statements is correct

manager-owner, principal-agent problem.

owner-worker, principal-agent problem.

manager-worker, principal-agent problem.

3. Suppose compensation is given by W = 100,000 + 157 + 12S, where W = total compensation of the CEO, = company profits (in millions) = $340, and S = sales (in millions) = $700. What percentage of the CEO's total earnings is tied to sales of the firm?

13.5 percent

5.2 percent

19.6 percent

33.0 percent