One view of the firm is that stockholders hire managers who,in turn,hire workers.Maximum profits are earned by satisfying the customer.The two principal-agent relationships illustrated in this view are:
A)manager-stockholder; worker-manager
B)stockholder-manager; customer-manager
C)manager-stockholder; manager-worker
D)stockholder-manager; manager-worker

Question

Quizplus · Accepted Answer

This view of the firm suggests that the principal-agent relationships are between the stockholders and the managers, and between the managers and the workers. The goal is to maximize profits by satisfying the customer. Therefore, the best choice is D, which includes both the stockholder-manager and the manager-worker relationships.

One View of the Firm Is That Stockholders Hire Managers