What Is the Principal-Agent Problem

question 126

Multiple Choice

What is the principal-agent problem?

• A)It is a problem caused by a person (principal)who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way.
• B)It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.
• C)It is a problem of the power system of boss and subordinate where the boss (principal)exerts influence over his subordinates (agents)using punishment or threat.
• D)It is a problem that exists when a person (principal)has more information about the task than the agent he hires to perform the task.

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Definitions:

VLTs

Video Lottery Terminals, a form of electronic gambling machine found in casinos and bars.

Exogenous Opiates

Narcotics, which bind to receptor sites throughout the body, including the brain, spinal cord, and bloodstream, and reduce the body’s production of endogenous opiates.

Opioids

Also known as narcotics. A class of central nervous system depressants whose main effects are the reduction of pain and sleep inducement. Opium, the alkaloid from which opioids are derived, comes from the seeds of the opium poppy, which is indigenous to Asia and the Middle East.

Heroin

A narcotic substance derived from morphine, originating from the seed pods of opium poppy plants, known for its strong addictive properties and illegality.