Monitoring costs are:
A) the costs of a failure in bargaining.
B) rarely incurred in contracts between a principal an agent.
C) the insurance costs of guaranteeing that the principal will not incur a cost of contract failure.
D) the costs of reviewing and overseeing the actions of an agent.

Question

Quizplus · Accepted Answer

Monitoring costs refer to the expenses incurred by the principal to monitor the actions and performance of the agent to ensure that they are aligned with the principal's goals. These costs involve reviewing and overseeing the agent's work, providing feedback, and taking corrective measures if necessary. Hence, option D is correct, while options A, B, and C are not relevant to the concept of monitoring costs.

Monitoring Costs Are