A principal-agent problem occurs when hiring workers to work for a firm because
A) workers' interests are not always the same as the interests of the owners of the firm.
B) workers do not respond to incentives.
C) the owners of a firm are always in a position to exploit the workers.
D) workers' interests are not important in the managerial decisions of the firm.

Question

Quizplus · Accepted Answer

The principal-agent problem arises when the interests of the workers (agents) do not align with the interests of the owners (principals), leading to potential conflicts and inefficiencies.

A Principal-Agent Problem Occurs When Hiring Workers to Work for a Firm