Scenario 22-1
Esteban and Michaela own an apartment building. They hire Nico to manage the building and deal with tenants' complaints. They also hire Ted to make any necessary repairs to the apartments or the common area and they hire Rex to be the door guard at night.
-Refer to Scenario 22-1. Which of the following statements is correct?
A)If Rex falls asleep while he is supposed to be guarding the door, he has created an adverse selection problem.
B)Esteban and Michaela are the principals and Nico, Ted, and Rex are the agents.
C)Nico is the principal and Ted and Rex are the agents.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The owners (Esteban and Michaela) are the principals, and Nico, Ted, and Rex are their agents. Rex falling asleep would be a monitoring problem, not an adverse selection problem. Option C is incorrect because Nico, as the manager, is also an agent, not a principal.

Scenario 22-1 Esteban and Michaela Own an Apartment Building. They Hire Nico