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.

---

Definitions:

Railroads

Transportation systems using tracks and trains to convey passengers and freight over long and short distances.

Eastern Marketplaces

Economic regions or bazaars located in the eastern part of a country or region, especially significant in historical trade routes, known for the exchange of goods, services, and cultural practices.

Cotton Plantations

Agricultural estates dedicated to the mass production of cotton, a key crop in the economy of the American South before the Civil War.