Which of the following is one of the two conditions that lead to a moral hazard problem?
A) the principal possesses more information than the agent
B) the agent has an incentive to pursue goals and objectives that are different from the principal's
C) the principal acts in his own best interest, as opposed to the interests of the other stakeholders
D) the agent is given the authority to allocate scarce organizational resources

Question

Quizplus · Accepted Answer

A moral hazard problem occurs when the agent has an incentive to pursue goals and objectives that are different from the principal's. The other condition that leads to a moral hazard problem is that the agent has asymmetric information, meaning that they possess more information than the principal. The other choices are not conditions that directly lead to a moral hazard problem.

Which of the Following Is One of the Two Conditions