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Answer :
a. When an agent does not maximize the utility of the principal, is the principal-agent problem
The principal-agent problem is a classic problem in economics and finance, where there is a conflict of interest between thesuch as a shareholder or bondholder) and the agent (such as a manager or officer of the company).
The principal hires the agent to act on their behalf, but the agent's interests may not perfectly align with those of the principal.
The principal-agent problem arises because the agent has more information and control over the company's operations than the principal, and the agent may have their own self-interests that could lead them to make decisions that do not maximize the utility of the principal.
This could include decisions that benefit the agent at the expense of the principal, such as excessive risk-taking or misappropriation of company assets.
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