The principal-agent problem, as applied to the labor market, would have the:

A. employer as the agent and the worker as the principal.

B. employer as the principal and the worker as the agent.

C. employer and worker as the principals, and the customer as the agent.

D. customer as the principal, and the employer and worker as the agents.

Question

Business

Araceli Arnold

2 June, 21:00

The principal-agent problem, as applied to the labor market, would have the:

A. employer as the agent and the worker as the principal.

B. employer as the principal and the worker as the agent.

C. employer and worker as the principals, and the customer as the agent.

D. customer as the principal, and the employer and worker as the agents.

+4

Answers (1)

Know the Answer?

Kaya · Answer 1

The answer is B.

Explanation:

An agency relationship is a relationship between the principal and the agent.

A principal employs the service of an agent who acts on behalf of the principal.

An agent must make sure that there is no conflict on interest.

So in labor market, employer is the principal while the worker or employee is the agent.