In the Case of a Moral-Hazard Problem, Which of the Following

question 404

Multiple Choice

In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could

• A)better monitor the agent.
• B)pay the agent above-equilibrium wages.
• C)delay payment to the agent.
• D)stop paying bonuses.

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Definitions:

Worthless

Pertaining to an asset that has lost all monetary value.

Short-term Loss

A monetary deficit incurred from the sale or trade of an asset owned for less than a year.

Surtax

An additional tax levied on top of the base tax rate for specific purposes or income brackets.

MAGI

Modified Adjusted Gross Income is a measure used by the IRS to determine eligibility for certain tax benefits, adjusting the gross income by adding back certain deductions.