The principal-agent problem can lead to
A)market failure.
B)unacceptably low price.
C)overdelivering on contract requirements.
D)excessive purchases.

Question

Quizplus · Accepted Answer

The principal-agent problem can lead to market failure because the agent (such as a manager or employee) may not act in the best interest of the principal (such as the owner or shareholder). This can lead to inefficiencies, misallocation of resources, and ultimately, the failure of the market to generate optimal outcomes.

The Principal-Agent Problem Can Lead to