As Large Investment Banks Converted from Partnerships to Corporations,the Separation

question 69

Multiple Choice

As large investment banks converted from partnerships to corporations,the separation of ownership from control had the potential to lead to

• A) a moral hazard problem resulting in a principal-agent problem.
• B) an adverse selection problem resulting in a principal-agent problem.
• C) a reduction in moral hazard due to the elimination of the principal-agent problem.
• D) a reduction in adverse selection due to the elimination of the principal-agent problem.

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Definitions:

Physiological Desire

A fundamental need stemming from the body's biological functions, such as hunger, thirst, or the need for sleep.

Psychological Desire

An emotional state that compels individuals towards a specific need or want, influencing behavior.

Unfulfilled

A state or condition where expectations, needs, or goals have not been met or achieved.

Lower-order Needs

Basic human necessities such as physiological and safety needs, according to Maslow’s hierarchy.