The principal-agent problem means that managers must
A) find ways for managers to get people to buy stock in their company.
B) devise compensation rules to induce principals to act in the best interest of agents.
C) devise compensation rules to induce agents to act in the best interest of principals.
D) find efficient agents who will negotiate fair compensation rules for a firm's principal managers.
C
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Refer to the scenario above. Which of the following is true, if the individual is optimizing in levels?
A) An optimizer will rent the hotel room for three days, if the net benefit of staying for the third day is negative. B) An optimizer will rent the hotel room for three days, if the cost of staying for two days exceeds the cost of staying for three days. C) An optimizer will rent the hotel room for three days, if the net benefit of staying for three days exceeds the net benefit of staying for two days. D) An optimizer will rent the hotel for three days, if the total benefit of staying for three days exceeds the total benefits of staying for two days.
Refer to Table 4-4. The table above lists the highest prices three consumers, Curly, Moe, and Larry, are willing to pay for a bottle of champagne. If the price of one of the bottles is $27 dollars, total consumer surplus will be
A) $0. B) $14. C) $26. D) $53.