When Writing Contracts When Actions Are Unobservable, It Is Assumed

question 36

Multiple Choice

When writing contracts when actions are unobservable, it is assumed that, while the firm is risk _____________ and able to diversify its risk, the worker is risk _____________ because all of the worker's income is derived from the job.

• A) preferring, neutral
• B) neutral, averse
• C) averse, preferring

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Definitions:

Venture Capital

A form of private equity financing provided by investors to startups and small businesses with long-term growth potential.

Accounting Firms

Businesses specializing in providing financial services including auditing, taxation, financial reporting, and advisory services to their clients.

Entrepreneurial Effectiveness

The measure of an entrepreneur's ability to achieve desired business outcomes, such as growth, innovation, and sustainability.

Networks

A collection of interconnected people or organizations that exchange information and resources for professional or personal gain.