The Common Factors That Give Rise to All Principal-Agent Problems

question 4

Multiple Choice

The common factors that give rise to all principal-agent problems include the

• A) unobservability of some manager-agent action
• B) presence of random disturbances in team production
• C) the greater number of agents relative to the number of principals
• D) a and b only
• E) none of the above

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Definitions:

Profit Center

A branch or division of a company that is responsible for its own revenues and expenses, and thus its own profitability.

Generates Revenues

The process of creating income for a business through various activities such as sales, services, and investments.

Cost Center

A department or segment within a business that does not directly generate revenue but incurs costs, used for performance evaluation and budgeting.

Revenue Center

A segment of a business responsible for generating revenue through its operations and sales activities.