the principal-agent problem
What will be an ideal response?
occurs when the principal cannot observe the effort of the agent
problem : principal can't determine whether a bad outcome was because of the agent or bad luck
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The question "Should we produce houses using bricks or wood?" is an example of a ________ question
A) what B) how C) why D) for whom E) where
The figure above shows the production possibilities frontier for a country. If the economy is operating at point B, then the opportunity cost of another million gallons of milk is
A) 4 gallons of ice cream for a gallon of milk. B) 3 gallons of ice cream for a gallon of milk. C) 1 gallon of ice cream for a gallon of milk. D) 1/3 of a gallon of ice cream for a gallon of milk. E) zero because after producing another million gallons of milk then zero gallons of ice cream are produced.