Which Are Social Costs Associated with the Inability of Shareholders

question 17

Multiple Choice

Which are social costs associated with the inability of shareholders to observe an executive's effort? (You may choose more than one.)

• A)Excessive insurance offered.
• B)The executive has to be exposed to risk to induce effort,and risk is costly.
• C)The executive ends up exerting less than first-best effort.
• D)Excessive effort induced.

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Definitions:

Pumice

A light, porous volcanic rock formed from explosive eruptions, known for its ability to float on water.

Welded Tuff

A type of rock formed from volcanic ash ejected during an eruption, which then falls and welds together under high temperature and pressure.

Feldspar

A group of rock-forming silicate minerals that make up a significant portion of the Earth's crust, commonly found in igneous, metamorphic, and sedimentary rocks.

Quartz

A hard, crystalline mineral composed of silicon dioxide (SiO2), widely used in jewelry and as an industrial abrasive.