The Principal-Agent Problem ________

question 110

Multiple Choice

The principal-agent problem ________.

• A) arises because principals have incentives to free-ride off of the monitoring expenditures of other principals
• B) arises because principals find it simple to monitor agents' activities
• C) arises because agents' incentives are always compatible with those of the principals
• D) arises because principals' incentives are always compatible with those of the agents

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Definitions:

Outstanding Stock

The total shares of stock that are owned by investors, including shares held by institutional investors and company insiders.

Regular Cash Dividend

A fixed amount paid to shareholders out of a company's profits on a regular schedule.

Liquidating Dividend

A type of dividend paid by a company from its capital rather than its earnings, often during dissolution or winding down.