Scenario 22-6 ​

question 26

Short Answer

Scenario 22-6
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Shana owns a boutique that sells high-end women's clothing and accessories. Katie works part-time at the boutique and frequently is the only employee in this small store. Shana pays Katie a wage that is higher than the market wage for this type of job. When the store is not full of customers, Katie diligently works on displays and cleans to keep the store looking its best. Belinda is a customer in the store who asks Katie's opinion on the quality of some jeans she is considering purchasing. Katie tells her the quality is great even though she's had several other customers return them due to flaws. Magda is another customer who is returning a necklace without volunteering that a gem is missing.
-Refer to Scenario 22-6. Which of the ladies, if any, is committing a moral hazard?

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Definitions:

International Firm

A company that conducts its operations and business activities in more than one country.

Economic Conditions

The state of the economy at a given time, influenced by factors such as GDP growth rates, unemployment levels, and inflation rates.

Short-Run Exposure

The risk faced by companies due to fluctuations in exchange rates that can affect their transactions and finances in the near term.

Translation Exposure

The risk that a company's financial statements can be affected by changes in exchange rates when they have operations in foreign currencies.