Moral Hazard Is Said to Exist When One Party to a Transaction

question 25

Multiple Choice

Moral hazard is said to exist when one party to a transaction

• A)is not able to take advantage of the other party.
• B)has the incentive to,and is able to,shift costs to another party in the transaction.
• C)is subject to a hostile corporate takeover.
• D)purchases insurance because they know they are involved in risky activities.
• E)has no morals.

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Definitions:

Participatory Approach

A method of involving all stakeholders in the decision-making process, ensuring that diverse viewpoints are considered.

Top-Down Decision-Making

A hierarchical approach to decision making where decisions are made at the top levels and passed down to lower levels for implementation.

Direct Approach

A straightforward method of communication or action where intentions or needs are stated openly and without evasion.

Indirect Approach

A communication method where the main point is not stated at the beginning but comes after the explanation or background information.