If an Agent Is Risk Neutral and a Principal Is

question 54

Multiple Choice

If an agent is risk neutral and a principal is risk averse,which of the following contracts would be efficient in risk bearing?

• A) A fixed fee is paid to the agent.
• B) A fixed fee is paid to the principal.
• C) An hourly rate is paid to the agent.
• D) The agent enjoys a share of the profit.

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Definitions:

Social Problems

Challenges within society that affect a significant number of people and require collective action to address.

Code of Ethics

A set of principles and rules used by individuals and organizations to govern their decision-making process in a way that is consistent with moral and ethical standards.

Ethical Dilemma

A situation where an individual faces a decision between two morally right or wrong choices, with no clear right or wrong answer.

Gender

A social construct that encompasses a range of identities, expressions, and roles often associated with being male, female, a blend of both, or neither, and is influenced by social and cultural norms.