Discuss the role of trust as a critical piece of any principal-agent situation. In particular, what role did trust play in the recent stock market scandals?
What will be an ideal response?
The main problem in a principal-agent situation is that the agents cannot always be trusted. They may put their own interests ahead of those of their principals, in clear dereliction of duty. Recent stock market scandals in which managements having betrayed stockholders and employees while obtaining hundreds of millions of dollars in bonuses for themselves are evidence of the pattern of behavior associated with the principal-agent situation.
You might also like to view...
If firms in monopolistic competition are earning economic profits, then
A) they can expect to earn the profits indefinitely. B) new rivals enter the industry, and the demand for any seller's good decreases. C) the market demand becomes more inelastic. D) the industry is in long-run equilibrium. E) new rivals enter the industry, and the demand for any seller's good increases.
Answer the following statements true (T) or false (F)
1. Union membership has declined in all sectors of the workforce that have unions. 2. Research conducted by responding to job advertisements with fictitious resumes with either very African-American sounding names or very white-sounding names found that white-sounding names received 50% more callbacks for interviews. 3. One important way to use public policy to close the earnings gap between white people and black or Hispanic people would be to improve schools to reduce the gap in educational achievement. 4. By the turn of the millennium, about half of U.S. immigration came from Europe, about a third from Latin America, and the rest from various countries in Asia. 5. One disruptive effect of immigration on the economy is that immigration weighted toward low-skilled workers tends to reduce wages for domestic low-skilled workers.