The firm is frequently cited as a legal fiction created by individuals to enter into contracts that are in their perceived best interest.

*Describe the relevant participants that enter into contracts with the firm.

*Identify some items that might appear in each of the relevant participants utility function.

*The frequently stated goal of the firm is to maximize the expected value of the stock. Use utility theory to explain how this may not be the goal of the other participants that enter into contracts with the firm and how shareholders can reduce this problem.

*Use utility theory to explain the unethical behavior of some managers. Use utility theory to explain how the unethical behavior could be reduced.

*Describe agency conflicts that exist within the firm and how corporate governance may mitigate the adverse effects on the value of the firm.