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» Practice Questions
1. In an O-Ring Model, production depends on completing a series of tasks. True or false: in the model, one can substitute quantity for quality.
2. Assume N tasks, where there is one worker per task. Let q_i ∈[0,1] be the quality level of worker i. So if q_i=.6, this implies that there is a ________ percent chance of completing a task perfectly and a ________ percent chance of complete failure.
3. In a standard O-Ring Model, output is determined by multiplying the number of workers times the quality of output for each task. Suppose there is 20 workers and each produces their product perfectly every time. This implies that output would be:
4. In a standard O-Ring Model, output is determined by multiplying the number of workers times the quality of output for each task. Suppose the quality of the workers falls. This implies the failure rate will ____________ and output will ________________
rise, remain constant
5. Suppose there are two high quality workers and two low quality workers and two possible ways of organization. The O-Ring Model implies that high quality workers should be matched with _____________.
low quality workers
high quality workers
either high or low quality workers
6. One implication of the O-Ring Model is that countries with lower quality labor will have ___________________ output compared to countries with higher quality labor.
7. One implication of the O-Ring Model is that workers performing the same task earn _____________ wages in a high-skill firm than a low-skill firm.