"When One Hockey Team Spends a Large Sum of Money

question 5

Multiple Choice

"When one hockey team spends a large sum of money acquiring better players, it is better off. If all teams do the same thing, all of them are better off." What is this statement an illustration of?

• A) the fallacy of composition
• B) the ceteris paribus condition
• C) a misunderstanding of the direction of causality
• D) confusing correlation with causation

---

Definitions:

Principal-Agent Problem

A dilemma in relationships when one party (the agent) is expected to act in the best interest of another (the principal), but has the potential to act in their own self-interest instead.

Stockholders

Individuals or entities that own shares in a corporation, giving them partial ownership and possibly dividends based on the company's performance.

Profit Maximization

A process or strategy used by businesses to achieve the highest possible profit, considering revenue and costs.

Shirking

The behavior of avoiding work or responsibilities, often seen in employment contexts where workers may not perform their duties optimally.