The Buyer Runs a Risk of Being Sold a Good

question 326

Multiple Choice

The buyer runs a risk of being sold a good of low quality when there is

• A)a principal-agent problem.
• B)a moral-hazard problem.
• C)a problem involving hidden actions.
• D)a problem involving hidden characteristics.

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Definitions:

Negative Reinforcement

A behavioral concept where the removal or avoidance of an unpleasant stimulus strengthens a behavior.

Punishment

A method used in organizational context to reduce undesirable behaviors by applying negative consequences or removing positive ones.

Operant Conditioning

An instructional process in which the power of a behavior is influenced by the provision of rewards or the imposition of punishments.

Classical

Referring to the traditional or established principles in a field, or creative works of acknowledged excellence and enduring value.