When new professors are hired, their job performance is monitored closely. If they meet their institution's standards, they will eventually receive tenure. After receiving tenure, professors' job performance is less closely monitored, and they become difficult to fire. Tenure thus creates
A)adverse selection.
B)a Condorcet paradox.
C)a screening problem.
D)a moral hazard problem.

Question

Quizplus · Accepted Answer

Tenure can lead to a moral hazard problem because once professors receive tenure, their job performance is less closely monitored, and they become difficult to fire. This situation may reduce their incentive to maintain high performance levels, as the consequences for underperforming are significantly diminished.

When New Professors Are Hired, Their Job Performance Is Monitored