š SNMP manager and agent architecture (10 MCQs)
š From Data Communication and Networks ā¢ 27. Network Management ā¢ 10 questions available
What is SNMP manager and agent architecture?
The SNMP architecture consists of a manager that initiates requests and receives notifications, and agents residing on managed devices that store local management data and respond to manager queries or send unsolicited alerts when specific events occur.
š All SNMP manager and agent architecture MCQs
Q1. A manager delegates a sales task to an agent who possesses private information about market conditions. Which agency problem is most likely to arise?
š Explanation: Moral hazard arises because after delegation the agentās effort is unobservable, allowing the agent to shirk while the manager cannot directly monitor actions. The private information about market conditions exacerbates this issue, leading to a divergence between the agentās optimal behavior and the principalās objective.
Q2. In the principalāagent framework, who is the party that hires and pays for the agentās services?
š Explanation: In the principalāagent model the principal is the party that hires the agent, provides compensation, and bears the outcomes of the agentās actions. The principal sets the contract terms and seeks to align the agentās incentives with its own objectives, making it the hiring entity.
Q3. When output is perfectly observable, which contract form best aligns the agentās incentives with the principalās goals?
š Explanation: When output can be perfectly measured, a pieceārate contract directly ties payment to the amount produced, giving the agent a clear incentive to increase effort. This alignment of financial rewards with performance ensures that the agentās interests mirror the principalās goal of maximizing output.
Q4. Compare a fixedāsalary contract with a pieceārate contract when the agent is riskāaverse but output is noisy. Which statement is most accurate?
š Explanation: With noisy output, a riskāaverse agent dislikes variability, yet a pieceārate contract still offers stronger incentives than a fixed salary because it rewards higher output despite risk. The principal balances the incentive benefits against the agentās aversion to risk, making the pieceārate contract the more accurate description.
Q5. If two agents work on independent projects and the principal cannot observe individual effort, what is the likely equilibrium outcome?
š Explanation: When effort cannot be observed for each agent, each faces a temptation to shirk while hoping the other exerts effort. Since both have the same incentive to freeāride, the equilibrium outcome is that both agents choose low effort, resulting in mutual shirking as the dominant strategy.
Q6. How does an increase in monitoring cost affect the optimal contract offered by a riskāneutral principal to a riskāaverse agent?
š Explanation: Higher monitoring costs reduce the principalās willingness to invest in observation. To compensate, the contract shifts toward a larger fixed salary component, providing the agent with income security while minimizing the need for costly monitoring. This adjustment aligns with the principle that when monitoring is expensive, risk sharing increases.
Q7. Which of the following best captures the tradeāoff between risk sharing and incentive provision in an agency contract?
š Explanation: Providing stronger incentives (e.g., higher variable pay) exposes the agent to greater income variability, which is undesirable for a riskāaverse agent. Consequently, the principal must balance the desire for high effort against the agentās preference for risk sharing, meaning that increasing incentives inevitably reduces risk sharing.
Q8. In a simple agency game where the agent chooses effort eāÆāāÆ{0,1} and the principal sets wage w if output is high, the Nash equilibrium involves which combination?
š Explanation: Given the agentās hidden effort choice and the principalās wage contingent on observed high output, the agent prefers to exert low effort to avoid cost, and the principal anticipates this by offering a low wage. Hence the Nash equilibrium consists of the agent shirking (e=0) and the principal setting a low wage.
Q9. Designing an optimal contract under hidden action and a riskāaverse agent typically results in which structure?
š Explanation: Optimal contracts under hidden action and riskāaverse agents combine a modest base salary to provide insurance with a performanceābased bonus that motivates effort. The bonus is typically proportional to output, ensuring incentives, while the base salary mitigates the agentās risk exposure, achieving a balance between incentive provision and risk sharing.
Q10. When comparing agency problems in the private sector versus the public sector, which statement is most accurate?
š Explanation: Private sector principals can directly tie compensation to profit, creating strong financial incentives for agents. In contrast, public sector agents often operate under budgetary constraints and less flexible incentive structures, making it harder to employ profitābased rewards. Therefore, profit incentives are more effective in the private sector.