Rick goes to work 8 hours per day, but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams. This is an example of

Question

Quizplus · Accepted Answer

Moral hazard refers to a situation where one party takes risks because they know someone else will bear the cost of those risks. Hidden action refers to a situation where one party has more information or ability than another party, leading to opportunities for exploiting that advantage. In this case, Rick's behavior of spending most of his work hours monitoring his fantasy football teams constitutes hidden action as he is not fully utilizing his work hours, resulting in a cost to his employer. This behavior may also demonstrate moral hazard as he is taking the risk of misusing his company's time and resources because he anticipates that he will not be held accountable for his actions. Therefore, the correct answer is C - moral hazard and hidden action.

Rick Goes to Work 8 Hours Per Day, but While