Which of the Following Practices Are, at Least in Part

question 54

Multiple Choice

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

• A) Parking ramps require customers to take a ticket with the time stamped on it from a machine in order to gain entrance.
• B) Part of the income of waiters and waitresses is based on tips.
• C) Both A and B are correct.
• D) None of the above are correct.

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Definitions:

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Partial Equity Method

An accounting approach where an investor recognizes income from its investment in an associate to the extent of dividends received, differing from the full equity method which recognizes income as it's earned by the associate, regardless of dividends received.

Fair Value

The exchange value of an asset or the settlement cost of a liability in a well-arranged transaction with participants in the market on the measurement occasion.

Book Value

The net value of a company's assets minus its liabilities, often used as a measure of the company's worth.