Dan Heath is the majority owner of Plain Truth Advertising. He hires Shirley Downs as his chief executive officer (CEO). In terms of an economic model, Mr. Heath is the __________ and Ms. Downs is the _________.
A) agent; principal.
B) principal; agent.
C) principal; intermediary.
D) agent; intermediary.

Question

Quizplus · Accepted Answer

Mr. Heath is the principal as he is the majority owner of the company, and Ms. Downs is the agent as she is hired by the principal to manage the company on his behalf. This relationship is known as the principal-agent relationship, which is a common economic model used to describe the relationship between two parties, where one party (the principal) hires another party (the agent) to act on their behalf.

Dan Heath Is the Majority Owner of Plain Truth Advertising