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Microeconomics Study Set 26
Quiz 10: Organizing Production
The Possibility That the Managers of a Corporation Might Not
Question 373
True False
The possibility that the managers of a corporation might not always act in the best interest of its owners is an example of the principal-agent problem.
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Q 374
The only two ways of dealing with the principal agent problem are the use of long-term contracts and monitoring.
Q 375
The decision about whether a firm in each particular industry must operate as a proprietorship, partnership, or corporation is made by the Internal Revenue Service.
Q 376
Proprietorships generally have unlimited liability, whereas partnerships and corporations have limited liability.
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