In the absence of contracting or monitoring costs, the owner- operated team is:
A)Pareto- preferred to both the one person firm and the partnership.
B)Pareto- preferred to the one person firm.
C)Pareto- preferred to the partnership.
D)Pareto- preferred to large firms.

Question

Quizplus · Accepted Answer

In the absence of contracting or monitoring costs, the owner-operated team is Pareto-preferred to both the one-person firm and the partnership because it eliminates the principal-agent problem, aligning incentives and reducing inefficiencies that can arise from separate ownership and control.

In the Absence of Contracting or Monitoring Costs, the Owner-