Fill in the Blanks: _____ Is an Important Constraint in the Moral-Hazard

Multiple Choice

Fill in the blanks: _____ is an important constraint in the moral-hazard problem because _____.

A) The budget constraint ----it ensures the principal has enough money to pay the agent
B) The participation constraint ---it ensures the agent chooses the action in the principal's best interest
C) The participation constraint ----it ensures the principal is willing to offer the contract
D) The incentive-compatibility constraint -----it ensures the agent chooses the action intended in the contract