average fixed costs

Which of the following is NOT a solution to the manager-worker principal-agent problem?

Correct answer:

C) The threat of a takeover

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Explanation:

The principal-agent problem occurs due to misaligned priorities of managers and workers.

Steps like profit sharing or revenue sharing help in aligning the priorities. Time clocks and spot checks can create better monitoring.

However, the threat of a takeover has no positive effect on the problem. It won't solve the problem, and may only create further barriers.