If an Agent Is Risk Neutral and a Principal Is

question 54

Multiple Choice

If an agent is risk neutral and a principal is risk averse,which of the following contracts would be efficient in risk bearing?

• A) A fixed fee is paid to the agent.
• B) A fixed fee is paid to the principal.
• C) An hourly rate is paid to the agent.
• D) The agent enjoys a share of the profit.

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Definitions:

Organization's Mission

The fundamental purpose or overall goal that guides an organization, typically encompassing its values and aspirations.

Self-determination

The process by which a person controls their own life, including the freedom to make their own choices and decisions.

Job Context

The set of environmental and working conditions that can affect an employee's performance, including physical, social, and organizational factors.

Job Content

The specific duties, responsibilities, and tasks that constitute a particular job or position.