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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