A Store Owner May Not Be Available to Monitor the Manager

question 3

Multiple Choice

A store owner may not be available to monitor the manager' actions continuously and at all times.This inability to observe actions falls under the class of problems called:

• A)the principle-agent problem.
• B)adverse selection.
• C)the conflict of interest.
• D)the false consensus problem.
• E)fundamental attribution error.

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Definitions:

Average Cost

The total cost of production divided by the number of goods produced; also known as per unit cost.

Average Variable Cost

The unit cost of producing each product, calculated by dividing the variable costs (costs that vary with output) by the number of units produced.

Long Run

A period of time in which all factors of production and costs are variable, allowing for adjustments in all inputs and outputs.

Long-Run Supply Curves

A graphical representation showing the relationship between the price of a good and the quantity supplied over a longer period, considering adjustments in factors of production.