Question: Instructions- Logistics

This assessment is drawn from you learning during the entire term.

Learn to think broadly on the issues we studied- theimportance of rationality in decision making and the impact of human behaviorin limiting rational decision making. Connect the ideas (marginal analysis, explicit and implicit costs, economic profit/loss, decision making on extent decisions, pricing, moral hazards, etc.) Connect these ideas and concepts and provide coherent and complete answers to each of the questions.

1. Each questioncarries equal weight.

2. Deadlines must be met.

3. NEVER email me your answers. You MUST use the link in Blackboard to submit your work.

4. Use MS Word (I have problems opening Word Perfect) documents

5. Do not wait until the eleventh hour to start your work. Remember, your best and thoughtful answers come to you when you give yourself time to think about these questions and view them from multiple perspectives (diffuse learning).

6. Make sure that you think about all that you have learned and focus on the application of your learning.

7. Do external research and cite them, per APA format.

8. The length of each answer is your decision. Remember to balance the length of the answer by demonstrating sufficient explanatory knowledge, versus answers of unwieldy length (efficiency counts!). Conciseness and clarity are highly valued in the business world.

9. Note: this is a graduate class and that recitation of definitions and descriptions are not complete answers.

Question 1. This question pertains to the rational decision making model. In answering the questions below use examples to highlight your arguments. Make sure that your external research are properly cited.

A. Analyze the rational actor paradigm model and the influence of human behavior on rational decision making (bounded rationality, role of incentives...).

B. What analytical methodology (or methodologies) is recommended for selecting amongst alternative decisions choices, so that a decision be made based on "rational" foundation.

C. How does the recommended methodology eliminate the impact of sunk cost fallacy?

Question 2. In his spare time, Mr. Smith makes chain mail using metal rings he buys from a hardware store, a C-clamp, and a pair of pliers. He sells the final product at local crafts fairs and at bikers' annual conventions. He argues that "The materials cost me $30, and the rest is just my labor, which is free. One vest sells for about $150, which gives me net profit of $120 for three nights of work."

A. Is he talking about economic profit or accounting profit? Explain the difference between the two.

B. Also, comment on Mr. Smith's statement from an economic perspective (hint: implicit cost)

Question 3. Analyze two examples - one for direct and the second on indirect price discrimination - along the following questions.

A. Describe how the firm executes on its pricing strategy

B. Analyze and evaluate the market conditions, the design of its product /service, etc. that allow the firm to segment the market, practice price discrimination and prevents arbitrage between segments.

Question 4: Company A allows its employees flexibility to work from home about 80% of the time. So, employees are required to come to the office minimum 1 day a week (5 days week). Since 24-hour monitoring of employee activity is not possible (if possible, highly intrusive), employees are measured on work productivity/work effort.

A. Discuss the nature of the moral hazard inherent in this work arrangement on the part employees.

B. Discuss work /human resource policies and productivity/performance metrics that can be employed to measure productivity and make hidden action less hidden.

C. Is there a risk of adverse selection? If so, discuss how that might occur.