In the Moral Hazard Problem The

question 106

Multiple Choice

In the moral hazard problem the:

• A)agent tends to undertake more effort than the principal considers desirable
• B)agent tends to undertake less effort than the principle considers desirable
• C)problem of asymmetric information is absent
• D)agent does not exhibit any 'undesirable' behaviour

---

Definitions:

Vestibulocochlear Nerve

A cranial nerve that transmits sound and equilibrium (balance) information from the inner ear to the brain.

Merkel Disks

Specialized skin cells that function as mechanoreceptors, responding to light touch and pressure.

Mechanoreceptors

Sensory receptors that respond to mechanical pressure or distortion.

EEG

Electroencephalogram, a test that measures and records the electrical activity of the brain.