Which of the following offers an explanation as to why the principal-agent problem exists for a firm?
A)The firm cares less about profit and more about cost when there are many competitors in the market.
B)The firm offers an employee-incentive program in which employees share in the firm's profits.
C)The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm.
D)The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.

Question

Quizplus · Accepted Answer

The principal-agent problem arises because the goals of the principal (the firm, seeking to maximize profit) and the agent (the employee, seeking to minimize effort for the same pay) are not aligned, leading to inefficiencies and conflicts of interest.

Which of the Following Offers an Explanation as to Why