At Tony's Car Wash, a team of four workers washes and rinses each car by hand, and one worker dries the car by hand. Which of the following is true?
a. Tony will have no principal-agent problems.
b. Tony will have more principal-agent problems in washing and rinsing than in drying the cars.
c. Tony will have more principal-agent problems in drying than in washing and rinsing the cars.
d. Tony will be awash in severe principal-agent problems.
e. Tony will have no incentive to monitor the car wash.
B
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Under which one of the following contracts does an agent have the least incentive to behave opportunistically?
A) The agent pays a fixed fee to the principal for the right to all future payoffs. B) The agent works for the principal on an hourly basis. C) The agent receives a share of the profit. D) The agent works for the principal on a per unit basis.
A profit-maximizing monopoly will choose advertising expenditures so the ratio of advertising expenditures to total revenue is equal to the ratio of advertising elasticity to price elasticity (in absolute value)
Indicate whether the statement is true or false