The tendency for managers to operate a firm in a way that maximizes their personal utility rather than the firm's profits is referred to as the:

CA Foundation · Business Economics · MTP · June 2024
The tendency for managers to operate a firm in a way that maximizes their personal utility rather than the firm's profits is referred to as the:
(A) A. consumer utility incentive.
(B) B. principal-agent problem.
(C) C. hidden agenda scenario.
(D) D. Modigliani hypothesis.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. principal-agent problem.

Topics: Nature & Scope of Business Economics

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