We Can Say That a Contract Is Able to Prevent

question 47

Multiple Choice

We can say that a contract is able to prevent moral hazard when

• A) it eliminates production inefficiencies due to moral hazard without shifting risk to risk-averse people.
• B) it eliminates production inefficiencies due to moral hazard without shifting risk to risk-loving people.
• C) it shifts risk to risk-loving people.
• D) it eliminates production inefficiencies due to moral hazard and shifts risk to risk-averse people.

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Definitions:

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