Agency Problems Appear in Many Settings Within a Firm

question 10

Multiple Choice

Agency problems appear in many settings within a firm.All of the following are examples,except which is NOT a good example of this problem?

• A) Diversified stockholders are more enthusiastic on accepting business risks than are firm managers.
• B) Firm managers receive cash bonuses based on the performance of the firm.
• C) Employees sometime take items from the store in which they work.
• D) Lenders to firms want the managers to invest in safe projects to protect their collateral in the project but managers want to invest in projects that will make a name for them and warrant promotion.
• E) Firm managers sometime want to relax on the job.

---

Definitions:

Rebates

Rebates are partial refunds to purchasers of products or services, often used as a promotional tool by marketers to increase sales or the perceived value of a product.

Peak-Load Pricing

Pricing strategy that involves charging higher prices during peak times when demand is higher and resources are more constrained.

Third-Degree Price Discrimination

A pricing strategy where different prices are charged to different segments of customers based on their willingness to pay.

Second-Degree Discrimination

A pricing strategy where prices are varied depending on quantity sold, such as bulk discounts, or according to product versions.