Question

Because managers (________) have less incentive to maximize profits than the stockholders-owners (________) do, stockholders find it costly to monitor managers; thus, they are reluctant to purchase equities.

a. agents; agents
b. agents; principals
c. principals; agents
d. principals; principals

Answer 1

b.

Step-by-step explanation:

The manager is an agent of th stockholders-owners, who is the principal

An agent is like a representative and should act in the interest of the principal, but as the interest of the two may conflict, you have this agent-principal problem