Which of the following is true? A free rider contributes to teamwork but does not receive pay Mitigating the agency problem requires alignment of the interests of principal and agent The horizon problem describes agents who focus on the long-term Agency costs are an advertising expense None of the above

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Business

Wiggles

6 December, 19:58

Which of the following is true? A free rider contributes to teamwork but does not receive pay Mitigating the agency problem requires alignment of the interests of principal and agent The horizon problem describes agents who focus on the long-term Agency costs are an advertising expense None of the above

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Answers (1)

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Tanner Weiss · Answer 1

Answer: None of the above

Explanation:

The free rider problem is a form of market failure that takes place when those who benefit from public goods like public hospitals or roads, or communal services either under pay or do not pay for them. Free rider is a problem because such people may continue enjoying the service despite not paying for the good. This can lead to the underproduction, degradation or over used.

Horizon problems occurs when people favour short run benefits at the expense of longer benefits. Here, members claim on the benefits of an investment is not up to the required length of time for the benefits to be generated leading to horizon mismatch.

Agency cost is when the principal hires or chooses an agent o act on his behalf. It is an internal expense that arises from the actions of an agent who is acting on behalf of a principal. It arises due to dissatisfactions, inefficiencies and disruptions between shareholders and management.