In the Context of Agency Theory, Which of the Following

question 25

Multiple Choice

In the context of agency theory, which of the following is a difference between agents and principals?

• A) Agents are the owners of a business, whereas principals are the managers of a business.
• B) Agents take risks when they make decisions, whereas principals do not take risks.
• C) Agents are less likely than principals to focus on a short time horizon.
• D) Agents often have more information about the day-to-day business than do principals.

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Definitions:

Commodity

A fundamental merchandise in commerce that can be swapped with other merchandise of a similar nature.

Maximise

To increase to the greatest possible amount or degree within a given set of constraints, often used in the context of profit or utility maximization.

Input

A resource or component used in the production process to produce goods and services.

Production Function

A production function is a mathematical model that describes the relationship between inputs used in production (like labor and capital) and the output produced.