You Own an Ice Cream Store and Are Concerned That

question 20

Multiple Choice

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This is an example of

• A)a moral hazard problem.
• B)adverse selection.
• C)behavioral economics.
• D)signaling.

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Definitions:

Unilateral Mistake

A mistake by one party to the agreement.

Innocent Misrepresentation

A false statement of a material fact made by a party that honestly believed the fact to be true.

Erroneous Statement

A declaration or assertion that is incorrect or mistaken in fact.

Consideration

Something of value given by all parties to a contract that induces them to enter into the agreement to exchange mutual performances.