Joshua's boss is out of town for one week, leaving Joshua alone in the office. Joshua decides to spend more time than usual checking his social media accounts during the day instead of working. This is an example of:
A)adverse selection.
B)the observation effect.
C)the principal-agent problem.
D)workplace distortions.

Question

Quizplus · Accepted Answer

The principal-agent problem occurs when there is a conflict of interest between a principal (in this case, Joshua's boss) and an agent (Joshua), where the agent has more information about his actions than the principal. Joshua taking advantage of his boss's absence to use social media instead of working is a classic example of the principal-agent problem, where the agent (Joshua) pursues his own interests over those of the principal (his boss).

Joshua's Boss Is Out of Town for One Week, Leaving