Define and illustrate a principal-agent problem
The problem arises when either buyer or seller exercises a personal and undisclosed interest that undermines the market's efficiency. Suppose you have a taxi service and hire a driver to cruise the town for passengers. The driver, if paid by the hour, may spend unusually large amounts of time at a coffee shop instead of seeking fares. In this case, you are the principal, the driver is the agent and you have a problem!
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Which of the following statements is true?
A. Economic profit is always positive. B. Economic profit is greater than or equal to accounting profit. C. Accounting profit is greater than or equal to economic profit. D. Accounting profit is always positive.
Long-lived goods used for producing other goods and services are called:
A. consumption goods. B. capital goods. C. value-added goods. D. non-market goods.
Checks are cleared between private banks by:
A. The 12 regional Federal Reserve banks. B. The Executive Branch of government. C. The Federal Reserve Board of Governors. D. State banking commissions.
The short-run aggregate supply curve will shift to the right when:
A. Energy prices increase. B. Government regulation increases. C. Prices of inputs decrease. D. Investment spending decreases. E. Productivity rates decrease.