Moral Hazard

question 42

Multiple Choice

Moral hazard

• A) occurs when managers pursue maximization of profit without regard to the interests of society in general.
• B) exists when either party to a contract has an incentive to cancel the contract.
• C) occurs only rarely in modern corporations.
• D) is the cause of principle-agent problems.

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Definitions:

Qualitative Research

A research method that explores and understands the meaning individuals or groups ascribe to social or human problems, often using techniques like interviews, observations, and analysis of text and documents.

Normative

Relating to an ideal standard or model, and pertaining to rules that govern behavior within a group or society.

Empirical

Based on observation or experience rather than theory or pure logic, relating to data which can be measured or observed directly.

Diagnostic

Pertaining to or aiding in the detection and identification of a disease, condition, or distinctive characteristics.