The common factors that give rise to all principal-agent problems include the
A) unobservability of some manager-agent action
B) presence of random disturbances in team production
C) the greater number of agents relative to the number of principals
D) a and b only
E) none of the above

Question

Quizplus · Accepted Answer

The unobservability of some manager-agent action (A) and the presence of random disturbances in team production (B) are common factors that give rise to principal-agent problems. Additionally, the greater number of agents relative to the number of principals (C) can also contribute to these issues, but it is not necessarily a universal factor. Therefore, choice D - a and b only - is the best answer.

The Common Factors That Give Rise to All Principal-Agent Problems