Which of the Following Situations Is Most Realistic in Principal-Agent

question 12

Multiple Choice

Which of the following situations is most realistic in principal-agent situations?

• A) writing contracts when actions are unobservable
• B) taking actions when contracts are unannounced
• C) writing contracts when actions are observable

---

Definitions:

Problem Solving

The process of identifying a challenge and finding an effective solution for it.

Cerebral Cortex

The outer layer of the cerebrum in the brain, involved in various high-level brain functions such as thought, memory, and consciousness.

Primary Motor Cortex

An area of the brain located in the frontal lobe, involved in planning, control, and execution of voluntary movements.

Somatosensory Cortex

The part of the brain responsible for processing sensory information from across the body, such as touch, temperature, and pain.