If Information Is Asymmetric,explain Why the Hire Contract Is Not

question 73

Essay

If information is asymmetric,explain why the hire contract is not efficient in production and a moral hazard exists,but the fixed fee to the principal contract is efficient and does not pose a moral hazard problem.

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Definitions:

Map Coordinates

A system of numbers that uniquely identifies positions on the surface of the earth or a map, often represented in latitude and longitude or an alphanumeric grid.

Tonnage

A measure of weight or volume used to quantify the size or cargo capacity of ships, or the output of a production process.

Labour Climate

The overall environment and conditions affecting labor relations, including workers' attitudes, union activities, and employer-employee negotiations.

Taxes

Mandatory financial charges imposed by a government on individuals, businesses, and transactions to fund public expenditures.