In a Principal-Agent Relationship the _____ Is Acting on Behalf

question 21

Multiple Choice

In a principal-agent relationship the _____ is acting on behalf of the _____.

• A)agent / client
• B)employer / employee
• C)agent / principal
• D)principal / agent

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Definitions:

Risk-loving

Refers to individuals or entities that prefer or are willing to take more risks, often for the possibility of higher returns.

Marginal Utility

The additional satisfaction or benefit received from consuming one more unit of a product or service.

Asymmetric Information

One of the parties to a transaction has information relevant to the transaction that the other party does not have.

Adverse Selection

A situation in which asymmetric information results in high-quality goods or high-quality consumers being squeezed out of transactions because they cannot demonstrate the quality of the product they are offering for sale.