In which situation is moral hazard MOST likely to be a problem?
A)buying pasta at the grocery store
B)hiring a new manager to work the night shift
C)buying a new lawnmower
D)buying a house directly from the previous owner

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party takes risks knowing that another party will bear the cost of those risks. Hiring a new manager to work the night shift involves placing trust in an employee who may have the opportunity to shirk responsibilities or engage in risky behavior, knowing that the consequences will be faced by the employer. This situation presents a greater likelihood for moral hazard than the other options given.

In Which Situation Is Moral Hazard MOST Likely to Be