Question: In this section the student is to define the situation as a principle-agent problem. The description of the situation should have enough detail so that the lay-reader can understand the situation at hand. Also, the student should define clearly who is the principle and who is the agent in this situation. Section 2: Who is making the Decision? In this section the student should outline who is making the decision in this situation. The purpose of this section is to make clear what the source of the problem. As outlined in the text, if this is a moral hazard or adverse selection problem this section should make that clear to the lay-reader.