Which of the Following Is True of the Principal-Agent Problem

question 88

Multiple Choice

Which of the following is true of the principal-agent problem?

• A) It arises when the interests of the agent and the principal differ.
• B) It arises when it is relatively easy for the principal to monitor the agent's performance.
• C) When there is a principal-agent problem, agency costs are zero.
• D) When there is a principal-agent problem, the agent is usually worse off.

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Definitions:

Psychometric

Referring to the field of study concerned with the theory and technique of psychological measurement, which includes the development and application of tests to measure abilities, attitudes, and personality traits.

Causal Relationships

A connection between two events where one is understood to be directly responsible for causing the other.

Dependent Variable

In an experiment, the variable being tested and measured, expected to change as a result of manipulations of the independent variable.

Independent Variables

Independent variables are factors or conditions in experiments that are manipulated or changed by researchers to determine their effects on dependent variables.