red and yellow topics

Question 1

divorce of ownership from control - principal agent problem

Answer 1

when the objectuves of the principals (owners) and agents (managers) diverge
principals usually want profit maximisation while managers may want other things like higher pay, job security ot prestige so may not profit maximise
asymmetric info - managers know more about the firm than owners do
common in oligopolies with complex managerial out

Question 2

short run shutdown point

Answer 2

when AVC can be covered by revenue
AVC<P
otherwise, firm will pause production in short run

Question 3

long run shutdown point

Answer 3

tr<tc
firm leaved the industry