Which of the Following Describes a Moral Hazard Problem

question 162

Multiple Choice

Which of the following describes a moral hazard problem?

• A) a process by which individuals have substantial resources devoted to the exchange process and need to make a profit or they will be adversely affected
• B) a post-contractual problem that may result because participants to the exchange process have information that allows them to act in an opportunistic manner
• C) a process by which individual buyers or sellers with better information are more likely to participate in voluntary exchange
• D) a contractual problem that results because monopolies exist in all economies

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Definitions:

Conflict of Interest

A situation in which a person's or entity's personal interest interferes with their ability to make impartial decisions.

Consortium

A group of companies or organizations that join together for a common purpose, often to undertake a substantial project beyond the resources of any single member.

Collusion

A secret agreement or cooperation between two or more parties for a deceitful, illegal, or fraudulent purpose.

Duty of Performance

An obligation in contract law requiring parties to complete their contractual obligations.