Case Study Questions: Rafael Nadal And Venus Williams

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Chapter 1: Applied problems, 4, 5, and 6, pages 32-33, and Mathematical Exercise #2, page 35. 4. Explain why it would cost Rafael Nadal or Venus Williams more to leave the professional tennis tour and open a tennis shop than it would for the coach of a university tennis team to do. I would have to say that one cost of opening a tennis shop is the opportunity cost of labor or the forgone salary of other job options. Because Nadal’s or Williams' foregone income is much higher than that of a university coach, their opportunity cost is higher. 5. An article in the Wall Street Journal discusses a trend among some large US Corporation to base the compensation of outside members of their boards of directors partly on the performance of the corporation.…show more content…
Why would directors be more efficient than shareholders at improving managerial performance and changing their incentives? How would such a linkage tend to reduce the agency problems between managers and shareholders as a whole? Such a linkage can reduce the agency problem because it more closely ties the director’s individually efficient action with aggregate surplus; that is, the overall most efficient outcome, and optimal performance of the corporation. This means that the shareholder’s preferred outcome will more closely resemble that of the directors. Why would directors be more efficient than shareholders at improving managerial performance and changing their incentives? Directors would be more effective at altering the performance of managers specifically because they have a position to more directly control the managers’ incentives. Shareholders can only periodically vote on large issues, which do not directly affect the individually efficient behavior for managers. Directors, on the other hand, can adopt policies that tie the managers’ compensation to their performance, or threaten them with loss of their jobs if they perform below a certain…show more content…
Suppose you are a stock market analyst specializing in the stocks of them parks, and you are examining Disneyland’s stock. The Wall Street journal reports that tourism has slowed down in the United States. At Six Flags Magic Mountain in Valencia, California a new Viper roller coaster is now operating and another new ride, Psyclone, will be opening this year. Using demand and supply analysis, predict the impact of these events of ticket prices and attendance at Disneyland. As reported in the Wall Street journal, Disneyland slashed ticket prices and admitted that attendance was somewhat lower. Is this consistent with your prediction using demand and supply analysis? In light of the fact that both price and output were falling at Disneyland, is the law of demand being violated in the world of
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