A Firm Owner Wants a Manager to Make Difficult Personnel

A firm owner wants a manager to make difficult personnel decisions when necessary (which requires firing a worker every now and then) in order to maximize the firm's profits. The manager, however, prefers to not fire anyone. The worker also prefers not to be fired. In this example, who is the principal and who is the agent?

A) The firm owner is the principal. The manager is the agent.
B) The firm owner is the principal. The should-be-fired worker is the agent.
C) The manager is the principal. The firm owner is the agent.
D) The should-be-fired worker is the principal. The manager is the agent.
E) The should-be-fired worker is the principal. The firm owner is the agent.

Correct Answer:

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