A Principal-Agent Problem Occurs When Hiring Workers to Work for a Firm

question 327

Multiple Choice

A principal-agent problem occurs when hiring workers to work for a firm because

• A) workers' interests are not always the same as the interests of the owners of the firm.
• B) workers do not respond to incentives.
• C) the owners of a firm are always in a position to exploit the workers.
• D) workers' interests are not important in the managerial decisions of the firm.

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Definitions:

Appeal to Fear

A persuasive technique that attempts to influence people’s behavior by making them feel afraid of the consequences of not taking a particular action.

Feared Consequence

The anticipated negative outcome that one believes will occur as a result of certain actions or events.

Persuasive

Having the ability to convince or influence others to believe or do something through reasoning or the appeal to emotions.

Persuasion

The act of influencing someone's beliefs, attitudes, or behaviors through argument, reasoning, or appeal.