Multiple Choice
Moral hazard occurs when
A) the principal monitors an agent.
B) two people might trade with each other and one person has relevant information about some aspect of the product's quality that the other person lacks.
C) an agent lacks an incentive to promote the best interests of the principal, and the principal cannot observe the actions of the agent.
D) an agent monitors the principal.
Correct Answer:
Verified
Correct Answer:
Verified
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