Why Is the Principal-Agent Problem Less Likely When Getting a Haircut

question 112

Multiple Choice

Why is the principal-agent problem less likely when getting a haircut than when getting a car repaired?

• 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:

Security Interest

A legal claim or lien on collateral that secures the performance of an obligation, normally repayment of a loan.

Financing Statement

A document filed by a creditor to indicate a security interest in a debtor's assets, used primarily in secured transactions.

Security Agreement

A formal document granting a creditor a security interest in an identified asset or property, used as collateral for a loan.

Conflicting Security Interests

A situation where multiple parties claim a security interest in the same collateral, potentially leading to disputes over priority and rights.