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Author Question: What is the principal-agent problem? A) It is a problem caused by a person (principal) who hires ... (Read 97 times)

darbym82

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on: Jun 29, 2018
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 of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat.
  C) 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.
  D) It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.

Question 2

Is a firm technologically efficient if it uses the latest technology? Why or why not?
 
  What will be an ideal response?


mjenn52

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Reply #1 on: Jun 29, 2018
Answer to Question 1

D

Answer to Question 2

Technological efficiency occurs when a firm produces a given level of output using the least amount of inputs. Adopting the latest available technology does not necessarily imply that a firm's production process is technologically efficient. As long as the firm is getting the maximum possible output for a given combination of inputs, it is technologically efficient.


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