Which of the Following Is Most Usefully Thought of as a Principal-Agent

question 23

Multiple Choice

Which of the following is most usefully thought of as a principal-agent problem?

• A)the problem elected leaders have in ensuring bureaucrats carry out their wishes
• B)the problems courts have in getting citizens to abide by their decisions
• C)the problem politicians face in getting voters to vote for them
• D)the problems presidents and prime ministers have when "cohabitating"

---

Definitions:

Retained Earnings

The segment of net profits that are not distributed as dividends, instead kept within the company for reinvestment in its main operations or for debt repayment.

Current Asset

A slightly different term for assets likely to be used or turned into cash within one fiscal year or operating cycle, emphasizing liquidity.

Land

An asset representing the earth's surface that a company owns, used for operations, development, or investment.

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its price, reflecting a company's ability to meet short-term obligations.