Which of the Following Is Not an Example of a Principal

question 44

Multiple Choice

Which of the following is not an example of a principal trying to solve the moral-hazard problem? The principal

• A)calls the agent's references.
• B)installs hidden cameras to monitor the agent's behavior.
• C)pays the agent efficiency wages.
• D)pays the agent a year-end bonus.

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Definitions:

Operating Leverage

A financial concept that measures the proportion of fixed costs to variable costs in a company's cost structure, affecting profitability with changes in sales volume.

Net Operating Income

The profit generated from a company's core business operations, excluding expenses and revenues from non-operational activities.

Contribution Format

A form of income statement that distinguishes costs by classifying them into variable and fixed sections, thereby focusing on the contribution margin.

Contribution Margin Ratio

A ratio that measures the difference between the sales and the variable costs of a product or service, as a percentage of sales.