Question

Isabella went to city hall to submit a variance request for a deck on the second story of her home. She wants this deck because her neighbor, Yousef, just built a wall between their properties for privacy but this wall has obstructed the Isabella’s view of the valley below. Upon entering the permits office, Isabella sees Yousef working behind the counter. She worries he may drag his feet in approving the variance for her deck or even deny it for his own aims, i.e., that he wants to maintain his personal privacy. This situation exemplifies the ______.

a. Wilson’s theory of tasks
b. principal-agent problem
c. standard operating procedure problem
d. incentivizing problem

Answer 1

Answer: B

Explanation:


The two parties have different stakes at hand and one cannot directly ensure that they are always acting in their best interest. This problem usually arises when one person has the power to make decisions for another, which is why it's called the "principle-agent" problem. In this case, Yousef has the power over whether or not Isabella get's that variance for her deck, and he might not give it to her since it wouldn't be in his best interests.
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