Which of the Following Offers an Explanation as to Why

question 60

Multiple Choice

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

• A)The firm cares less about profit and more about cost when there are many competitors in the market.
• B)The firm offers an employee-incentive program in which employees share in the firm's profits.
• C)The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm.
• D)The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.

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Definitions:

Reasonable Market Value

An estimate of the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell.

Gateway 2000

Initially a direct sales personal computer manufacturer that became notable during the 1990s for its direct sales model and cow-spotted shipping boxes.

Arbitration

A type of alternative dispute resolution in which disputes are submitted for resolution to private nonofficial persons selected in a manner provided by law or the agreement of the parties.

Binding Contract

An agreement between two or more parties that is legally enforceable in court.