An Activity Known as Shirking Is Least Likely to Occur

question 146

Multiple Choice

An activity known as shirking is least likely to occur when

• A) workers are not monitored.
• B) all workers are paid the same wage rate.
• C) the earnings of workers are closely tied to the worker's output.
• D) the firm is organized as a corporation.

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Definitions:

Moral Hazard Problem

A situation where one party engages in risky behavior knowing that it is protected against the consequences, usually by a contract or an agreement, leading to suboptimal outcomes for the other party.

Automobile Insurance

A policy purchased by vehicle owners to mitigate costs associated with car accidents.

Medical Coverage

Insurance that pays for medical expenses, including doctor visits, hospital stays, surgery, and sometimes prescription drugs.

Law Clerks

Individuals, often law school graduates, who assist judges by conducting legal research and drafting opinions.