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The​ principal-agent problem occurs when
A. a​ firm's shareholders fulfill their own interest rather than the interests of top management.
B. the principal gives an agent conflicting objectives which the agent is unable to fulfill.
C. an agent pursues his​ principal's interests rather than his own interests.
D. an agent pursues his own interests rather than the interests of the principal who hired him.

Respuesta :

Answer:

The correct answer is option D.

Explanation:

The principal-agent problem refers to the situation when an agent starts working for his interests rather than the interest of the principal. In other words, it is a conflict of interest between the owner of assets and a person who holds the control of assets.

It occurs when an agent takes decisions on behalf of the principal. It leads to market failure.

For instance, the conflict of interest between shareholders and management.

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