Costs incurred in ensuring that the agent performs tasks as expected best defines
A) opportunity costs.
B) agency costs.
C) time-on-task costs.
D) production costs.

Question

Quizplus · Accepted Answer

Agency costs refer to the costs incurred in ensuring that the agent (such as an employee or a manager) performs tasks as expected. These costs can include monitoring costs, incentive costs, and bonding costs, which are incurred to reduce the agency problem and ensure that the agent acts in the best interest of the principal (such as a shareholder or an owner).

Costs Incurred in Ensuring That the Agent Performs Tasks as Expected