Give Examples of How Government Intervention Helps Reduce Moral Hazard

question 28

Essay

Give examples of how government intervention helps reduce moral hazard and adverse selection problems in internal labor markets.

---

Definitions:

Paid-In Capital

The amount of money that a company has received from shareholders in exchange for shares of stock.

Retained Earnings

The portion of net profits that are kept in the company rather than distributed to shareholders as dividends, often used for reinvestment in the business.

Legal Capital

is the portion of a company's equity that cannot legally be distributed to shareholders and is meant to protect creditors.

Cash Dividends

Cash distributions from a corporation to its shareholders, representing the profit share paid out.