B

Average annual income:
$150,000 ($600,000 ÷ 4 years)Average investment:
$460,000 [($840,000 + $80,000) ÷ 2]
Average rate of return:
32.6% ($150,000 ÷ $460,000)

A

True

The Ringelmann effect is a phenomenon that occurs when individual members of a group become less productive as the size of the group increases. This effect was first identified by French agricultural engineer Max Ringelmann in the early 20th century. He observed that when individuals worked together to pull a rope, the total force exerted by the group was less than the sum of the forces that each individual would have exerted if they were pulling alone.

An example of the Ringelmann effect can be seen in a tug-of-war competition. When only one person is pulling the rope, they might give their maximum effort. However, as more people join the effort, each person might start to pull less hard, relying on the collective strength of the group. The result is that the group's total pulling force does not increase proportionally with the number of people pulling.

There are two main factors that contribute to the Ringelmann effect:

1. **Social Loafing**: This is the tendency for individuals to exert less effort when they are working in a group compared to when they are working alone. People may feel that their individual contribution is less noticeable in a group, and therefore they do not need to work as hard because others will pick up the slack. This is a psychological factor where the presence of others leads to a decrease in personal accountability and motivation.

2. **Coordination Loss**: As the number of people in a group increases, it becomes more difficult to synchronize and coordinate their efforts effectively. In the case of the tug-of-war, not everyone might pull at exactly the same time or with the same force, leading to inefficiencies. This is a logistical factor where the increase in group size creates practical difficulties in organizing and aligning individual actions towards a common goal.

Both social loafing and coordination loss contribute to the overall decrease in group productivity as group size increases, which is the essence of the Ringelmann effect. Understanding this phenomenon is important for managers and team leaders, as it highlights the potential downsides of larger teams and the importance of ensuring that each team member remains engaged and effectively coordinated.

B