p.2
Definition and Origin of Firms
What are firms?
Firms are organizations that produce goods or services for profit.
p.2
Definition and Origin of Firms
Where did firms originate?
Firms originated as a response to the need for organized production and trade.
p.2
Functions and Roles of Firms
What is the primary function of firms?
To produce goods and services efficiently and effectively.
p.2
Comparison of Markets and Organizations
How do markets differ from organizations?
Markets are based on voluntary exchanges, while organizations are structured entities with defined roles.
p.2
Contracts and Employment Relationships
What role do contracts play in firms?
Contracts formalize agreements and expectations between parties in a firm.
p.2
Contracts and Employment Relationships
How does the employer-employee relationship differ from market interactions?
The employer-employee relationship is based on contracts and obligations, while market interactions are voluntary and based on supply and demand.
p.2
Motivation and Compensation of Workers
What are key factors in paying and motivating workers?
Fair compensation, incentives, and recognition are crucial for motivation.
p.2
Worker-Owned Cooperatives
What is a worker-owned cooperative?
A business organization owned and operated by its workers, sharing profits and decision-making.
p.2
Characteristics of Multinational Enterprises
What defines a multinational corporation?
A multinational corporation operates in multiple countries, managing production or delivering services across borders.
p.3
Functions and Roles of Firms
What is the main focus of Chapter 6 in 'The Economy'?
The Firm: Owners, Managers, and Employees.
p.20
Definition and Origin of Firms
Where can you participate in a guessing game about the first real firm?
At www.menti.com using access code XXX XXX.
p.11
Functions and Roles of Firms
Why do people participate in firms voluntarily?
Because of mutual gains; they can do better as part of the firm than if they are self-employed.
p.19
Worker-Owned Cooperatives
What is a cooperative?
A cooperative is an organization owned and operated by a group of individuals for their mutual benefit.
p.16
Contracts and Employment Relationships
What is meant by 'employment rent'?
The difference between the value of a job and the value of being unemployed.
p.7
Comparison of Markets and Organizations
What drives purchases and sales in a market?
Purchases and sales result from the independent decisions of buyers and sellers responding to price incentives.
p.16
Contracts and Employment Relationships
Why do most workers care about employment rent?
Because it reflects the significant difference between job value and unemployment value.
p.14
Motivation and Compensation of Workers
How can financial rewards influence employee effort?
Financial rewards from measurable outputs can motivate employees, such as a percentage of on-time departures in an airline.
p.18
Worker-Owned Cooperatives
How do inequalities between workers and managers compare in cooperatives?
Inequalities are typically less in worker-owned cooperatives.
p.22
Characteristics of Multinational Enterprises
What does the percentage of equity from other countries signify for a multinational?
It indicates foreign ownership and investment in the company.
p.15
Labour Law Variations and Employment Rent
Do workers care about losing their jobs if paid the lowest acceptable wages?
No, they may be indifferent between having the job and losing it.
p.11
Functions and Roles of Firms
What is the main reason people choose to join firms instead of being self-employed?
The potential for mutual gains.
p.8
Contracts and Employment Relationships
What is lacking when a worker moves between departments within the same firm?
There is no price mechanism within the firm.
p.7
Comparison of Markets and Organizations
How is authority structured within a firm?
Authority is hierarchical, with someone in charge telling employees what to do.
p.17
Contracts and Employment Relationships
Why do firms hire fewer workers at $15/hr than at $10/hr?
Because the demand curve for labor is downward-sloping.
p.17
Contracts and Employment Relationships
What happens to some workers at the wage of $15/hr?
Some workers will remain unemployed despite being willing to work at a lower wage.
p.23
Characteristics of Multinational Enterprises
What role do MNEs play in the global economy?
They act as 'global factories' with complex global value chains.
p.21
Contracts and Employment Relationships
How did shareholders benefit from the British East India Trading Company?
They paid in capital and owned shares, receiving a portion of the profits.
p.22
Characteristics of Multinational Enterprises
Why is the percentage of employees, including top management, important for multinationals?
It shows the diversity and international nature of the workforce.
p.6
Functions and Roles of Firms
How is the division of labour coordinated in the economy?
In two major ways: within firms and through markets.
p.13
Motivation and Compensation of Workers
What is a piece rate payment system?
A system where workers are paid a fixed amount for each unit produced, such as $2 for each t-shirt sewed.
p.19
Worker-Owned Cooperatives
What is the significance of cooperatives in New Zealand?
Cooperatives play a vital role in various sectors, contributing to the economy and community development.
p.6
Contracts and Employment Relationships
How do workers within a firm interact regarding their output?
Workers rely on each other's output but do not sell their labour to each other.
p.19
Worker-Owned Cooperatives
What sectors commonly utilize cooperatives in New Zealand?
Agriculture, retail, and services are common sectors for cooperatives in New Zealand.
p.19
Worker-Owned Cooperatives
What are the benefits of cooperatives for their members?
Members benefit from shared resources, profits, and decision-making power.
p.17
Contracts and Employment Relationships
Why are firms hesitant to lower wages?
Firms fear that lowering wages will lead to low worker effort.
p.21
Historical Context of Multinational Corporations
What was granted by Queen Elizabeth I on December 31, 1600?
A royal charter for the establishment of the British East India Trading Company.
p.4
Definition and Origin of Firms
Do firms typically consist of one or multiple people?
Most firms consist of more than one person.
p.10
Motivation and Compensation of Workers
What is a common interest among all members of a firm?
The firm's success and increasing its value/equity.
p.6
Functions and Roles of Firms
What does division of labour within firms entail?
Production is coordinated so that different departments or teams perform different functions.
p.18
Worker-Owned Cooperatives
Why do cooperatives usually require fewer supervisors?
Because employees are motivated to work hard due to shared profits.
p.4
Functions and Roles of Firms
How do most people in developed countries earn a living?
By working in private firms.
p.18
Worker-Owned Cooperatives
What is a common practice of cooperatives during recessions?
They tend not to lay off workers.
p.21
Functions and Roles of Firms
What governance structure did the British East India Trading Company have?
It had a Chairman and a Board, functioning as its own entity owned by shareholders.
p.20
Definition and Origin of Firms
What is the first 'real firm' in history?
The specific firm is not mentioned in the text.
p.9
Contracts and Employment Relationships
What do contracts for products sold in markets do?
Permanently transfer ownership of the good from seller to buyer.
p.12
Contracts and Employment Relationships
How does hiring employees differ from renting machinery or buying raw materials?
A firm cannot write an enforceable employment contract that specifies exact tasks and effort due to uncertainty about future needs.
p.18
Worker-Owned Cooperatives
What happens if a worker shirks in a cooperative?
Fellow workers will not tolerate it as it reduces profits for everyone.
p.22
Characteristics of Multinational Enterprises
What percentage of sales outside of the home country indicates about a multinational?
It reflects the company's global market presence.
p.9
Contracts and Employment Relationships
How are market interactions typically characterized?
They are usually short-lived and often not repeated.
p.17
Contracts and Employment Relationships
What is involuntary unemployment?
Unemployment that occurs when workers are willing to work at a lower wage but cannot find jobs due to firms not lowering wages.
p.12
Contracts and Employment Relationships
Why is it difficult for a firm to observe a worker's effort?
It is hard and costly for the owner/manager to monitor a worker's effort.
p.5
Functions and Roles of Firms
Who are considered stakeholders?
Individuals or groups affected by a company's actions, including employees, customers, suppliers, and the community.
p.13
Motivation and Compensation of Workers
Why is piece rate payment less common outside the manufacturing sector?
Because output is hard to measure in modern knowledge- and service-based economies.
p.21
Functions and Roles of Firms
What resources did the British East India Trading Company possess?
It had employees for hire and owned ships.
p.15
Labour Law Variations and Employment Rent
How do labour laws regarding termination of employment differ?
They vary greatly among countries, especially concerning low-quality work.
p.10
Contracts and Employment Relationships
What is a key question regarding profit distribution in a firm?
Should the firm pay out its profit to owners or invest more into research & development?
p.12
Contracts and Employment Relationships
What challenge does a firm face when hiring employees?
The firm cannot predict exactly what it will need the employee to do in the future.
p.5
Functions and Roles of Firms
How do shareholders typically influence a company?
Through voting rights and ownership stakes.
p.4
Functions and Roles of Firms
What role do firms play in the economy?
Firms are major actors in both domestic and global economies.
p.22
Characteristics of Multinational Enterprises
What does 'depth of market coverage' indicate for multinationals?
It refers to the extent of market engagement, such as exports versus investment.
p.21
Characteristics of Multinational Enterprises
What powers did the British East India Trading Company acquire?
It controlled the Indian subcontinent, had its own army, and issued its own money.
p.12
Contracts and Employment Relationships
What is an 'incomplete contract' in the context of employment?
An incomplete contract is one that cannot specify exact tasks and effort due to the uncertainty of future needs.
p.14
Motivation and Compensation of Workers
What is one reason people put in a good day's work?
A good job is its own reward, providing learning and growth.
p.18
Worker-Owned Cooperatives
How are profits shared in worker-owned cooperatives?
Profits are shared as a bonus, typically 10-20% of salary each year.
p.5
Functions and Roles of Firms
What is a key concern for stakeholders?
The overall impact of the company's operations on their interests and well-being.
p.5
Functions and Roles of Firms
In what way do shareholders and stakeholders differ in their interests?
Shareholders focus on profit, while stakeholders consider broader social and environmental impacts.
p.22
Characteristics of Multinational Enterprises
What does 'breadth' refer to in the context of multinational companies?
The number of countries in which the company operates.
p.18
Worker-Owned Cooperatives
What is a major challenge in starting a worker-owned cooperative?
Borrowing funds from banks is hard.
p.8
Contracts and Employment Relationships
How is a worker's transition from department X to department Y within the same firm typically handled?
They are usually simply told to do so.
p.15
Labour Law Variations and Employment Rent
What does the saying 'They pretend to pay us, we pretend to work' imply?
It reflects a mutual indifference in the employer-employee relationship, particularly in low-wage contexts.
p.10
Contracts and Employment Relationships
What are some areas where conflicting interests may arise in a firm?
Distribution of profits, company policies, etc.
p.9
Contracts and Employment Relationships
What do contracts for labor within a firm do?
Temporarily transfer authority over a person’s activities from the employee to the manager/owner.
p.16
Contracts and Employment Relationships
Why do firms not pay workers the lowest possible wage they’d accept?
To create an employment rent that benefits both the firm and the employees.
p.14
Motivation and Compensation of Workers
What role do good working conditions play in employee motivation?
Employees may feel gratitude for good working conditions, which can motivate them.
p.22
Characteristics of Multinational Enterprises
What are the dimensions of multinational companies?
1. Breadth (# countries) vs. depth of market coverage, 2. % of sales outside of home country, 3. % of equity from other countries, 4. % of employees including top management.
p.6
Functions and Roles of Firms
What is the division of labour in the economy?
It involves people doing different tasks, such as the production of an iPad, which requires many distinct tasks performed by different individuals.
p.5
Functions and Roles of Firms
What is the primary focus of shareholders?
Maximizing financial returns on their investments.
p.7
Comparison of Markets and Organizations
How is power distributed in a market?
Power in a market is decentralized, with buyers and sellers making independent decisions.
p.19
Worker-Owned Cooperatives
How are cooperatives structured in New Zealand?
Cooperatives in New Zealand are typically structured to ensure democratic control by their members.
p.14
Motivation and Compensation of Workers
How can a sense of responsibility motivate employees?
Employees may feel motivated by their responsibility for others on the team or the employer.
p.3
Functions and Roles of Firms
What section discusses the relationship between firms, markets, and the division of labour?
Section 6.1: Firms, markets, and the division of labour.
p.22
Characteristics of Multinational Enterprises
What is the definition of a multinational company?
A company that owns and/or controls value-adding activities in more than one country.
p.4
Definition and Origin of Firms
How is a firm often personified in discussions?
A firm is often referred to as if it were a person (e.g., 'Apple charges $700 for an iPhone').
p.3
Comparison of Markets and Organizations
What is discussed in Section 6.9?
Another kind of business organization.
p.7
Comparison of Markets and Organizations
What defines a firm in terms of economic power?
A firm is a concentration of economic power where owners and managers direct employees.
p.16
Contracts and Employment Relationships
How do employment rents benefit owners and managers?
1. Employees are more likely to stay with the firm. 2. They can threaten to fire the worker.
p.13
Motivation and Compensation of Workers
What complicates measuring individual contributions in team settings?
Employees rarely work alone, making it hard to assess the contribution of an individual worker.
p.3
Contracts and Employment Relationships
Which section addresses the concept of 'Other people's labour'?
Section 6.3: Other people’s labour.
p.14
Motivation and Compensation of Workers
What is a negative motivator that can induce high effort?
Fear of being fired can motivate employees to put in high effort.
p.21
Historical Context of Multinational Corporations
Why did Queen Elizabeth I allow the establishment of the British East India Trading Company?
Because she lacked the resources to fund expensive trading expeditions.
p.23
Impact of Multinationals on Global Trade
Why are MNEs considered important for national economies?
They are important economic engines for most national economies.
p.4
Contracts and Employment Relationships
What is a key issue regarding interests within a firm?
Different people in the same firm (e.g., owners, managers, workers) may have competing interests.
