The principal-agent problem is more serious in large firms than in small firms because
A)monitoring employee activity in large firms is generally more difficult.
B)employees in large firms have less information.
C)profits increase with the size of the firm.
D)customers expect better treatment from small firms and they usually get it.

Question

Quizplus · Accepted Answer

In large firms, there are more employees to monitor and control, which can make it more difficult for the principal (owner or manager) to ensure that the agents (employees) are acting in the best interest of the firm. Small firms, on the other hand, may have fewer employees, making it easier for the principal to monitor their behavior. Therefore, the principal-agent problem is generally more serious in large firms than in small firms.

The Principal-Agent Problem Is More Serious in Large Firms Than