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 caused by agents pursuing their own interests rather than the interests of the principals who hired them.
C) 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.
D) 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.
Answer: B
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The index that measures the change in price of a typical basket of consumer goods is
a. the GDP deflator. b. the consumer price index. c. nominal GDP. d. real GDP.
To illustrate the classical argument that "supply creates its own demand," the aggregate supply curve should be drawn:
A. downward-sloping. B. upward-sloping. C. horizontal. D. vertical.
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long run we will observe:
Select one: A. neither entry nor exit from the industry. B. firms leaving the industry. C. firms entering the industry. D. some firms entering and some firms leaving.
An increasing ratio of real GDP to BTU of energy consumption indicates that:
A. Increased energy consumption led to increased energy production B. Increased energy production led to increased energy consumption C. The discovery of energy sources greatly increased energy supply D. Advances in technology greatly increased energy efficiency