The Moral-Hazard Problem and the Desire of Firms to Lessen

question 148

True/False

The moral-hazard problem and the desire of firms to lessen that problem serve as a plausible explanation for a firm paying above-equilibrium wages to its workers.

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Definitions:

Realized Gain

Profit resulting from the sale of an asset or investment for more than its purchase price.

Stock Dividend

A disbursement from a corporation to its shareholders, using shares as the medium instead of cash.

Stockholders' Equity

The ownership interest of shareholders in a corporation, represented by their share of the company's assets after all liabilities have been deducted.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during the bond's life, usually at the discretion of the bondholder.