A Factory Owner Wants His Workers to Produce as Many

question 23

Multiple Choice

A factory owner wants his workers to produce as many widgets as they can,so he pays his workers based on how many widgets they produce.However,in order to make sure that the workers do not rush and produce a large number of poorly made widgets,he checks the widgets at random at various stages of their manufacture.If a defect is found in a widget,the pay of the entire section of the factory responsible for that defect is docked.How is this factory owner seeking to solve the principal-agent problem in this case?

• A)by supplying incentives so the agents act in the way principal desires
• B)by ensuring that all workers co-operate to maximize the gains of their section
• C)by making the agents into principals themselves
• D)by maximizing the information that the principal obtains about the behaviour of the agents
• E)by using quality control techniques

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Definitions:

Mechanistic

Characterizes an organizational structure that is highly bureaucratic, with strict rules, procedures, and a clear hierarchy, focusing on efficiency and predictability.

Flexible

Capable of adapting to changes and new conditions in a thoughtful and efficient manner.

Span of Control

The number of individuals that a manager or supervisor is directly responsible for overseeing in an organizational structure.

Supervisory Direction

Guidance and oversight provided by supervisors to ensure tasks and activities are completed according to organizational standards.