Discuss the role of trust as a critical piece of any principal-agent situation. In particular, what role did trust play in the recent stock market scandals?
What will be an ideal response?
The main problem in a principal-agent situation is that the agents cannot always be trusted. They may put their own interests ahead of those of their principals, in clear dereliction of duty. Recent stock market scandals in which managements having betrayed stockholders and employees while obtaining hundreds of millions of dollars in bonuses for themselves are evidence of the pattern of behavior associated with the principal-agent situation.
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If price exceeds average variable cost but is less than average total cost, a firm
A) should shut down. B) should further differentiate its product. C) should stay in business for a while longer until its fixed costs expire. D) is making some profit but less than maximum profit.
Which of the following does Gordon believe people consider the single most important macroeconomic issue today?
A) inflation B) poverty C) unemployment D) low productivity
Which of the following was asserted by Gary Becker regarding employment discrimination?
a. Businesses will tend to avoid discriminatory employment practices because of competitive markets. b. Bigoted business owners will continue discriminatory employment practices despite productivity losses. c. Market forces and federal laws will be unable to overcome the bigoted nature of most employers. d. Market forces and productivity gains guarantee the end of discriminatory employment practices.
The failure of the Knights of Labor to bring about structural change in the U.S. economy and society was mainly due to
a. the disruptive activities of detective agents hired by employers b. its inability to convince its own members of the importance of these wider goals c. its failure to represent the less-skilled industrial workers d. its excessive focus on craft unions e. its limited membership