Which of the following is an example of a principal-agent problem?
A)Jordan buys a new car that seems to have more flaws than the average new car.
B)Jeff, a CEO, puts pressure on his staff to increase productivity.
C)Maria slacks off at work when her boss is on vacation.
D)Ingrid is highly risk-averse and tends to over-insure against loss.

Question

Quizplus · Accepted Answer

A principal-agent problem occurs when one person (the principal) hires another person (the agent) to act on their behalf, but the agent has different incentives or objectives than the principal. In this scenario, Maria is the agent and her boss is the principal. When her boss is on vacation and not there to oversee her work, Maria slacks off, which creates a conflict of interest between her and her boss.

Which of the Following Is an Example of a Principal-Agent