Which of the Following Is an Example of a Principal-Agent

question 8

Multiple Choice

Which of the following is an example of a principal-agent problem?

• A) A buyer who makes a large raise in bid at an auction to discourage other bidders.
• B) A doctor who performs a large number of in-office tests and is paid per test.
• C) An elderly couple who elect a generous medical insurance policy.
• D) A board of directors that is trying to refine the compensation system for its CEO.
• E) A pitcher (about to sign with a new team) who is aware of a nagging elbow pain.

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Definitions:

Direction of Attention

The focus or prioritization of cognitive resources on specific aspects of the environment or a task.

Persistence

Persistence is the quality of continuing steadfastly in spite of challenges, obstacles, or difficulty, demonstrating a commitment to achieving a particular goal or objective.

Task Strategy

The method or approach chosen to effectively complete or achieve a specific work-related task or objective.

Task Complexity

The extent to which a job or assignment is complicated and challenging due to factors like variety, ambiguity, and information processing requirements.