Question

    Which of the following is a case of the principal-agent

    problem?
    A The ice cream man offers you $3 for an ice cream cone. You think this is too high and try to convince him to lower the price to $2, but he won’t budge. Correct Answer Incorrect Answer
    B A car dealer tries to sell you a car. She lowers the price and throws in perks. What she doesn’t know is that the car is way outside your budget and there is no way you’ll buy it. Correct Answer Incorrect Answer
    C You pick one hotel over another because its website advertises having a pool. After you arrive, you find out the pool is closed for the season. If you’d known this, you would have picked the other hotel. Correct Answer Incorrect Answer
    D Your doctor could diagnose your symptom herself as part of your regular visit. But she receives a bonus for referrals, so she recommends you make an appointment with a specialist. Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    You pick one hotel over another because its website advertises having a pool. After you arrive, you find out the pool is closed for the season. If you’d known this, you would have picked the other hotel.

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