Since It Is Costly for Stockholders to Monitor Corporate Managers

question 140

Multiple Choice

Since it is costly for stockholders to monitor corporate managers, managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization. This is an example of

• A) an external benefit.
• B) economies of scale.
• C) the principal-agent problem.
• D) sunk costs.

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Definitions:

Mutually Beneficial Relationships

Connections or partnerships where all parties involved gain advantages or rewards from the interaction.

PRSA

The Public Relations Society of America, a professional organization for public relations practitioners that provides training, sets ethical standards, and promotes the PR profession.

Corporate Philanthropy

The act of corporations donating some of their profits or resources to charitable causes.

Emerging Countries

Nations that are in the process of rapid growth and industrialization, often displaying potential for economic development.