In the principal-agent problem, the principal is a person who:
A)entrusts someone with performing a task.
B)carries out a task on someone else's behalf.
C)is in charge of an educational system.
D)is the source of the problem.

Question

Quizplus · Accepted Answer

The principal-agent problem arises when one party (the principal) entrusts another party (the agent) with the responsibility of performing a task or making decisions on their behalf, often leading to issues of moral hazard and conflicts of interest due to differing objectives.

In the Principal-Agent Problem, the Principal Is a Person Who