In a very basic principal-agent model,output is contractible if:
A)output can be observed with some positive cost.
B)the employee produces many products.
C)the employee works in a team.
D)the employee produces a single output.

Question

Quizplus · Accepted Answer

In a basic principal-agent model, output is contractible if the employee produces a single output. This is because it is easier to measure and monitor the output of a single task compared to multiple tasks. Option A can be true, but it is not necessary as the cost of observing the output is not a determining factor for contractibility. Options B and C are incorrect as they do not relate to the contractibility of output in the principal-agent model.

In a Very Basic Principal-Agent Model,output Is Contractible If