1. The principal-agent problem is most likely to occur in which of the following

Question

1. The principal-agent problem is most likely to occur in which of the following situation?

a. In a corporation, the owners hire a manager to oversee day-to-day operations

b. All options are correct

c. In a proprietorship, the owner directly manages day-to-day operations

d. In a partnership, each owner actively manages day-to-day operations

2. The principal-agent problem is caused by

a. Stiff penalties for managers who mismanage companies

b. Too many shareholders involved in corporate decision making

c. The separation of owners from those who manage the corporation

d. Too few managers involved in corporate decision making

Explanation / Answer

The separation of owners from those who manage the corporation

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