The Principal-Agent Problem Is Less Likely to Occur When Getting

question 107

Multiple Choice

The principal-agent problem is less likely to occur when getting a haircut than when getting a car repaired because ____

• A)haircuts are less expensive than car repairs.
• B)there are no hidden actions when getting your hair cut.
• C)there are no hidden actions when getting your car repaired.
• D)auto mechanics are less honest than hair stylists.
• E)there is no principal-agent relationship in car repair.

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Definitions:

Compounded monthly

A method where interest is calculated on the principal and any accumulated interest each month, effectively increasing the amount on which future interest is earned.

Deferral period

A span of time during which payments, obligations, or other actions are postponed or delayed.

Compounded quarterly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, applied every three months.

Quarterly withdrawals

The act of taking out money from a financial account or investment four times a year, often at the end of each fiscal quarter.