Question Details

Agency problems and costs are incurred whenever the owners of a firm delegate decision-making authority 



1.	According to the innovation theory of profit, above-normal profits are necessary to compensate the owners of the firm for the risk they assume when making their investments.
a.	true
b.	false



	2.	According to the managerial efficiency theory of profit, above-normal profits can arise because of high-quality managerial skills.
a.	true
b.	false



	3.	Which of the following (if any) is not a factor affecting the profit performance of firms:
a.	differential risk
b.	innovation
c.	managerial skills
d.	existence of monopoly power
e.	all of the above are factors



	4.	Agency problems and costs are incurred whenever the owners of a firm delegate decision-making authority to management.
a.	true
b.	false



	5.	Economic profit is defined as the difference between revenue and ____.
a.	explicit cost
b.	total economic cost
c.	implicit cost
d.	shareholder wealth
e.	none of the above



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