Scenario 22-1
Esteban and Michaela own an apartment building. They hire Nico to manage the building and deal with tenants' complaints. They also hire Ted to make any necessary repairs to the apartments or the common area and they hire Rex to be the door guard at night.
-Refer to Scenario 22-1. Which of the following is an example of a moral hazard problem?
A)Ted steals $5 off the counter in a tenant's apartment while he is there to repair a leaky faucet.
B)Esteban and Michaela do not tell Nico that they are planning to sell the building at the end of the year.
C)Esteban goes golfing while Michaela reviews the financials from the business.
D)Rex is paid an efficiency wage to ensure productivity because he is usually not monitored while working.

Question

Quizplus · Accepted Answer

Ted stealing money while performing his duties is a moral hazard problem because he is taking advantage of the lack of monitoring to engage in opportunistic behavior.

Scenario 22-1 Esteban and Michaela Own an Apartment Building. They Hire Nico