Multiple Choice 1. Which of the following represent a principal-agent relationship? a. Patient and dentist b. Worker A and worker B c. Client and lawyer d. Both a and c. 2. The management control system includes: a. delegation of decision rights. b. commitments. c. pricing decisions. d. capital budgeting. 3. An advantage of decentralization is that it: a. pays attention to the company as a whole. b. does not waste any of corporate resources. c. improves employee morale. d. benefits smaller, regulated companies. 4. Decentralization: a. takes advantage of local knowledge. b. delays response to local problems. c. reduces dysfunctional decision-making. d. gives top management more control. 5. Delegation of decision authority: a. is the essence of decentralization. b. is followed by performance evaluation and compensation. c. is part of management control system. d. All of the above. 6. A manager in charge of research and development is likely to be heading a: a. revenue center. b. profit center. c. standard cost center. d. discretionary cost center. 7. The manager of a profit center is responsible for all of the following except: a. sales revenue. b. corporate overhead. c. production costs. d. marketing costs.