What Is the Principal-Agent Problem

question 1

Multiple Choice

What is the principal-agent problem?

• A) When the principal misrepresents the agent to the board
• B) When an agent does not maximize the utility of the principal
• C) The cost of training new agents
• D) When an agent misrepresents the principal to the board

---

Definitions:

Discrete Random Variable

A variable that can take on a countable number of possible values, often representing counts or categories.

Expected Value

The long-run average or mean value of random variables, indicating the anticipated outcome of an experiment if it were repeated many times.

Discrete Random Variable

A variable that assumes a finite number of unique values, typically signifying the results of a stochastic process.

Continuous Random Variable

A type of random variable that can take an infinite number of possible values within a given range, often associated with measurements.