What is the principal-agent problem?
A) It is a problem caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way.
B) It is a problem of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat.
C) It is a problem that exists when a person (principal) has more information about the task than the agent he hires to perform the task.
D) It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.
D
You might also like to view...
Even though government-operated firms do not have to make a profit, they usually operate efficiently
Indicate whether the statement is true or false
If consumer confidence rises and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer
IRAs, and 401(k) and 403(b) plans
a. impose added taxes on those who save. b. place no limits on the amount people can deposit into these programs. c. impose penalties for withdrawals except under certain circumstances. d. None of the above is correct.
?The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering services from Raton to Santa Fe. It has estimated that the total cost of the trip will be $400, of which $150 is the fixed cost, which it has already paid. The company expects an increase in revenue by $275 from the trip. The Hound Dog Bus Co. should:
a. ?offer this service because it will earn a positive economic profit. b. ?not offer this service because marginal revenue is less than marginal cost. c. ?not offer this service because total cost exceeds total revenue. d. ?offer this service because the additional revenue exceeds the additional cost of this service. e. ?offer this service because total revenue exceeds fixed cost.