The Principal-Agent Problem

question 122

Multiple Choice

The principal-agent problem

• A) occurs when managers have more incentive to maximize profits than the stockholders-owners do.
• B) would not arise if the owners of the firm had complete information about the activities of the managers.
• C) in financial markets helps to explain why equity is a relatively important source of finance for American businesses.
• D) all of the above.
• E) only A and B of the above.

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Definitions:

Playing Video Games

Engaging in electronic games controlled by user inputs through a computer system, console, or mobile device.

Median

The middle value of a data set when it is ordered from least to greatest, or the average of the two middle values if there is an even number of data points.

Yearly Donations

The total sum of donations received or given by an individual or organization over the course of a calendar year.

Thousands of Dollars

A unit of measurement used often in financial contexts to represent large sums of money, simplifying numbers by expressing them in thousands.