The principal-agent problem arises when
A. the principal and the agent have different objectives.
B. the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent.
C. the principal cannot decide whether the firm should seek to maximize the expected future profits of the firm or maximize the price for which the firm can be sold.
D. both a and b
Answer: D
You might also like to view...
Consider a small open economy with desired national saving of Sd = 1000 + 1000rw and desired investment of Id = 1000 - 500rw. Calculate national saving, investment, and the current account balance in equilibrium when the real world interest rate is
(a) rw = 0.025. (b) rw = 0.05. (c) rw = 0.0.
Specialization and international trade lead to
A) an outward shift in the production possibilities curve. B) an inward shift in the consumption possibilities frontier. C) a lower opportunity cost of domestic production of all goods. D) an enhanced level of consumption.
Equilibrium GDP in excess of potential GDP eventually will cause the aggregate
a. demand curve to shift outward. b. supply curve to shift outward. c. supply curve to shift inward. d. demand curve to become flatter.
Which of the following non-OPEC nations have raised and lowered production in step with the OPEC nations, thus making the cartel more effective?
A. Venezuela and Nigeria B. Iran and Iraq C. Mexico and Norway D. Mexico and the United States