The possibility that an employee may not work hard is an example of the
A)limited liability problem.
B)principal-agent problem.
C)transactions cost problem.
D)technological efficiency problem.
E)partnership problem.

Question

Quizplus · Accepted Answer

The principal-agent problem arises when one party (the principal) hires another party (the agent) to carry out tasks on their behalf, but there is a conflict of interest between the two parties. The employee may not work hard because they are not directly financially incentivized to do so, leading to a conflict of interest between the employer and employee. This is a classic example of the principal-agent problem.

The Possibility That an Employee May Not Work Hard Is