A Principal-Agent Problem Arises When

question 28

Multiple Choice

A principal-agent problem arises when

• A)only less-qualified workers apply for a job
• B)a firm must find a proxy for unobservable qualities needed in employees
• C)potential employees have more information about their own productivity than do prospective employers
• D)a customer knows little about the service provided by a business
• E)a customer knows little about the service provided by a business and is, therefore, given poor service

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Definitions:

Bearer Paper

A negotiable instrument or document of title that confers entitlement to the holder or bearer, with no named payee.

Endorsement

The act of signing one's name on the back of a check or other negotiable instrument, or a public declaration of support for a person, product, or service.

Delivery

The act of transferring an item from the seller to the buyer, where the legal ownership is passed.

Transferability

The ability of a financial instrument, asset, or property right to be transferred from one party to another.