Which is an example of solving moral hazard by finding the right kind of agents?
A)Worker pay is based on productivity.
B)Video surveillance monitors worker actions.
C)Additional screenings ensure that hard-working persons are hired.
D)Laws against theft and fraud reduce those problems in workplaces.

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party takes more risks because they know another party bears the consequences. Option C, additional screenings to ensure that hard-working persons are hired, directly addresses moral hazard by selecting agents (employees) who are less likely to exploit the asymmetry of information and responsibility, thus reducing the risk of moral hazard.

Which Is an Example of Solving Moral Hazard by Finding