Which of the following practices are, at least in part, attempts to reduce moral hazard problems?
A) Cashiers at movie theaters are required to give customers tickets.
B) An employer pays below equilibrium wages because he thinks his employees are not working as hard as they could be.
C) Both A and B are correct.
D) None of the above are correct.

Question

Quizplus · Accepted Answer

Cashiers giving tickets to customers is an attempt to reduce moral hazard problems because it creates a record of the number of people who have entered the theater, reducing the likelihood that the cashier pockets some of the money and fails to report the correct number of customers.

B is not correct because paying below equilibrium wages does not address moral hazard problems; it is more focused on addressing adverse selection problems (i.e., attracting only low-quality workers who are willing to accept lower wages).

Therefore, C and D are also not correct.

Which of the Following Practices Are, at Least in Part