What term do economists use to describe the issue that arises when ownership and control are separated?

Multiple choice question for Alternative Theories Of The Firm. Select an option, then review the explanation below.

Explanation

When ownership and management are divided, conflicts of interest can occur between owners (principals) and managers (agents). This conflict is known as the principal-agent problem.

Practice related questions from the same subject.

1.Why do companies create organizational slack within their structure?
2.Which of the following is NOT typically a motive behind a company merger?
3.Which of the following groups are not considered stakeholders in a business?
4.What type of merger occurs when two companies in the same clothing industry combine?
5.What type of merger occurs when a fiber manufacturing company combines with a clothing manufacturer?

What term do economists use to describe the issue that arises when ownership and control are separated?

Explanation

More Alternative Theories Of The Firm MCQs