The Principal-Agent Problem of Ownership Vs

question 89

Multiple Choice

The principal-agent problem of ownership vs. control of the corporation tends to get worse when:

• A) stock in a corporation is held exclusively by a small number of people who control the company's day-to-day operations.
• B) stock in the company is tightly held, but there are some "outsider" stockholders.
• C) stock in the company is very diffusely held, with no individual or group having control over a large block of stock.
• D) managers have profit-sharing schemes as part of their incentive package.
• E) managers focus on maximizing the firm's profits, rather than the firm's market share.

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Definitions:

Average Total Cost

The total cost of production divided by the total quantity of output produced.

Mixers

Devices or software used to combine multiple audio signals into one or more output channels.

Cakes

Baked confections made from ingredients like flour, sugar, and eggs, often sweetened and served as a dessert or for special occasions.

Economies of Scale

Economies of scale are benefits companies gain from their operation size, leading to a decrease in the cost per unit as their scale of operation increases.