Answer to Question 1
False
Answer to Question 2
An agency problem is a problem in determining managerial accountability that arises when delegating authority to managers. The average shareholder has no in-depth knowledge of a particular industry or how to run a company. They appoint experts in the industrymanagersto perform this work for them. As a result, shareholders are at an information disadvantage compared with top managers. It is very difficult for them to judge the effectiveness of a top-management team's actions when it can often only be judged over several years. Moreover the goals and interests of managers and shareholders may diverge. Managers may prefer to pursue courses of action that lead to short-term profits, or short-term control over the market, whereas shareholders might prefer actions that lead to long-term profitability such as increased efficiency and long-term innovation.
