One Way in Which Problems of Moral Hazard and Adverse

question 46

True/False

One way in which problems of moral hazard and adverse selection can be limited is through the use of profit sharing agreements, whereby managers and employees are given a share of the profits earned by the firm. That way the agents of the firms have a financial stake in the firm's success, and hence have their interests aligned with the principals.

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Definitions:

Representative Sample

A subgroup of a population that accurately reflects the members of the entire population, enabling statistically valid conclusions.

Random Sample

A subset of a population selected for a study or survey in which each member has an equal chance of being chosen, ensuring the results are statistically representative of the whole.

Convenience Sample

A non-probability sampling method where the sample is taken from a group of people easy to contact or to reach.

Longitudinal Sample

A research sample that is observed over a long period of time to track changes and developments in the subjects.