Solutions to the Moral Hazard Problem Include

question 53

Multiple Choice

Solutions to the moral hazard problem include

• A)low net worth.
• B)monitoring and enforcement of restrictive covenants.
• C)greater reliance on equity contracts and less on debt contracts.
• D)greater reliance on debt contracts than financial intermediaries.

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Definitions:

Conditional Response

A learned response to a previously neutral stimulus that becomes conditioned through association with an unconditioned stimulus.

Primary Reinforcer

A stimulus that satisfies a biological need, inherently reinforcing without prior learning.

Antecedent

An event, condition, or stimulus that precedes a behavior or response, often influencing or triggering it.

Extinction

In psychology, extinction is the process by which a conditioned response decreases or disappears after repeated presentations without the unconditioned stimulus.