Asked by Sushmita Shrestha on Sep 24, 2024
Verified
In managerial economics,agency costs refer to
A) booking travel arrangements
B) model and actor representation
C) imperfections in dealing with those hired
D) foreign espionage
Managerial Economics
An academic discipline that applies microeconomic theory and quantitative methods to solve business decision problems.
Agency Costs
are expenditures or losses incurred from the conflict of interest between principals (owners/shareholders) and agents (managers).
Imperfections
Flaws, faults, or defects that prevent something from being perfect or completely correct.
- Outline strategies for addressing the financial implications of agency conflicts within a business entity.
Verified Answer
RE
roshan ekanayake1 day ago
Final Answer :
C
Explanation :
Agency costs in managerial economics refer to the costs incurred due to the imperfect alignment of interests between the principal (shareholders) and the agent (management). These costs arise due to information asymmetry, conflicts of interest, and moral hazard. Examples include monitoring costs, incentive costs, and bonding costs. Booking travel arrangements, model and actor representation, and foreign espionage are not directly related to agency costs in managerial economics.
Learning Objectives
- Outline strategies for addressing the financial implications of agency conflicts within a business entity.