Final answer:
An agency problem occurs when someone acts in their own self-interest instead of the best interest of the person they are representing. A manager using company funds for personal expenses is an example of an agency problem.
Step-by-step explanation:
An agency problem refers to a situation where there is a conflict of interest between an agent and a principal. It occurs when someone (the agent) is entrusted to make decisions or carry out tasks on behalf of someone else (the principal), but acts in their own self-interest rather than in the best interest of the principal.
Out of the options provided, example 1) A manager using company funds for personal expenses, is an example of an agency problem. In this case, the manager is misusing company funds for personal gain, which goes against their role of managing the company's resources in the best interest of the shareholders (the principals).