Agency theory - Quiz | SaliceSalice

1. How does performance appraisal help in resolving agency problems?

By reducing costs

By eliminating information asymmetry

By increasing agent autonomy

By ensuring goal alignment

2. How can agency problems be mitigated?

Through monitoring and incentives

By reducing organizational hierarchy

Through eliminating agents

By increasing employee autonomy

3. Which type of contract is typically used to address agency problems?

Performance-based contracts

Fixed salary contracts

Verbal agreements

Open-ended contracts

4. What is the primary focus of Agency Theory?

Resolving conflicts between principals and agents

Enhancing organizational culture

Improving production efficiency

Aligning goals between employees and customers

5. What is the primary purpose of monitoring in Agency Theory?

To provide autonomy to agents

To ensure agents act in the principal’s best interest

To reduce operational costs

To eliminate all risks

6. Which of the following is a consequence of unresolved agency problems?

Enhanced trust between principals and agents

Decline in organizational performance

Elimination of monitoring costs

Reduced organizational costs

7. Which theory often complements Agency Theory in understanding organizational dynamics?

Behavioral Theory

Transaction Cost Theory

Resource Dependence Theory

Stakeholder Theory

8. Who are the “principals” in Agency Theory?

Customers

Shareholders or owners

Managers

Employees

9. What is “moral hazard” in Agency Theory?

When agents refuse to act on behalf of principals

When principals over-monitor agents

When agents act ethically in all situations

When agents take risks because they do not bear the full consequences

10. What is the “free-rider problem” in Agency Theory?

Agents demand higher salaries without performance guarantees

Agents overperform to gain incentives

Agents benefit from efforts of others without contributing equally

Principals avoid bearing costs of monitoring

11. Which of the following is an example of an agency cost?

Training costs

Product development costs

Monitoring expenses

Advertising costs

12. Which governance mechanism is commonly used to reduce agency problems?

Increasing autonomy for agents

Adopting informal agreements

Eliminating all performance metrics

Appointing independent boards

13. Which problem arises when agents pursue their own interests over those of the principals?

Communication breakdown

Coordination problem

Agency problem

Organizational inefficiency

14. Who are the “agents” in the context of Agency Theory?

Customers

Managers

Suppliers

Employees

15. In Agency Theory, “monitoring costs” refer to:

Costs of organizational expansion

Costs of product development

Costs incurred to oversee agent behavior

Costs of agent training

16. Which of the following is an example of aligning agent and principal goals?

Offering performance-based incentives

Increasing monitoring costs

Reducing workload for agents

Eliminating bonuses for agents

17. What is the key assumption about agents in Agency Theory?

Agents and principals have identical goals

Agents always act in the principal’s best interest

Agents lack decision-making power

Agents may act in their own self-interest

18. What are “bonding costs” in Agency Theory?

Costs incurred by principals to align agent interests

Costs of acquiring new customers

Costs of legal compliance

Costs of restructuring the organization

19. What is “adverse selection” in Agency Theory?

Aligning agent and principal goals

A situation where agents withhold critical information

A problem arising from excessive monitoring

Selecting agents based on their potential

20. Which of the following is a criticism of Agency Theory?

Neglect of trust and social relationships

Lack of application in real-world scenarios

Overemphasis on organizational culture

Focus on reducing transaction costs

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