The Problem That Arises When an Agent Does Not Complete

question 14

Multiple Choice

The problem that arises when an agent does not complete a task in the way intended by the principal is:

• A) the principal-agent problem.
• B) immoral hazard.
• C) diminishing returns.
• D) adverse selection.
• E) market failure.

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Definitions:

State Agency

An organization established by a state government to carry out specific functions, such as regulating industries or providing services.

Intellectual Property

Property that results from intellectual, creative processes. Copyrights, patents, and trademarks are examples of intellectual property.

Trademark

A distinctive mark, motto, device, or emblem that a manufacturer stamps, prints, or otherwise affixes to the goods it produces so that they can be identified on the market and their origins made known. Once a trademark is established (under common law or through registration), the owner is entitled to its exclusive use.

Patent

A government grant that gives an inventor the exclusive right or privilege to make, use, or sell an invention for a limited time period.