According to Agency Theory, Which of the Following Is NOT

question 32

Multiple Choice

According to agency theory, which of the following is NOT a fundamental difference between owners and managers?

• A) Owners are more focused on minimizing costs than are managers.
• B) Owners are more inclined to accept risk than are managers.
• C) Owners focus more on short-run profitability than do managers.
• D) Managers are more inclined than owners to spend resources on activities that are not essential to organizational profitability.
• E) Managers serve as agents who represent owners' interests.

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Definitions:

Production Function

An equation that describes the relationship between inputs and the maximum output that can be produced.

Slope

The rate at which a line rises or falls, indicating the steepness of a line on a graph, often representing change in variables in economics.

Isoquants

Curves that represent combinations of different inputs that produce the same level of output in production theory.

Production Function

A production function describes the relationship between inputs (like labor and capital) and the output that can be achieved with those inputs, illustrating the maximum output possible.