A large business finds it __________ than a small business to pursue secretly a high-risk investment in violation of the terms of its loan agreement, and so the large business is __________ beset by the moral hazard problem.
A) more difficult; more
B) more difficult; less
C) easier; more
D) easier; less

Question

Quizplus · Accepted Answer

A large business has greater financial resources than a small business, so it may find it easier to pursue a high-risk investment secretly. However, the larger business has more to lose if the investment fails, and its creditors may be less likely to extend future loans if it violates its loan agreements. Therefore, the large business is less beset by the moral hazard problem than a small business.

A Large Business Finds It __________ Than a Small Business