A situation in which one party makes a contractual agreement with a second party in the expectation that the second party will act on its behalf is known as

Question

Quizplus · Accepted Answer

This is because in a principal-agent relation, the principal (first party) hires an agent (second party) to act on its behalf, with the expectation that the agent will work in the best interest of the principal. The agent is given a certain level of authority (C) to perform tasks on behalf of the principal, and the principal relies on the agent to act as a representative of the principal's interests. This is not an adverse selection (A) or signaling (B) relation because there is no signal or selection process involved, and it is not a nonmarket relation (E) because it involves a contractual agreement.

A Situation in Which One Party Makes a Contractual Agreement