The temptation of imperfectly-monitored workers to shirk their responsibilities is
A)an example of the adverse-selection problem.
B)an example of the "lemons" problem.
C)an example of the principal-agent problem.
D)an example of signaling.

Question

Quizplus · Accepted Answer

The principal-agent problem arises when a principal (e.g. employer) hires an agent (e.g. worker) to perform a task but the interests of the principal and agent do not completely align, leading to the possibility of the agent shirking their responsibilities if not properly monitored. Option A refers to a situation where a seller has more information than a buyer, Option B is related to the problem of asymmetric information in the market for used goods, and Option D refers to the process of conveying information about oneself to signal their abilities or characteristics.

The Temptation of Imperfectly-Monitored Workers to Shirk Their Responsibilities Is