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Question: A private college adds a small café...
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Economics
Instruction: Must be human written and plagiarism free.
Question: A private college adds a small café to its building to
cater to the needs of its own students. The total cost of the
facilities for the café is $100,000. After a year of operations,
the college determines that operating the café is interfering with
its primary business of educating students. A group of enterprising
business students offer to purchase the café facilities for
$50,000. The college balks at the idea because it had paid $100,000
for the facilities. At this point, the college spends $10,000
advertising the café for sale hoping to get an outside buyer
willing to pay much more than the students and operate the café on
campus. When no outside offer was forthcoming, the students
increased their offer to $55,000. Should the college take the
students’ offer? Why or why not? (8 marks) Explain the principal
agent problem, and provide two incentives used by corporations to
minimize the negative effects on shareholders. (12 marks)
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