The temptation of imperfectly monitored workers to shirk their responsibilities is an example of
A)the moral hazard problem.
B)the adverse selection problem.
C)screening.
D)signaling.

Question

Quizplus · Accepted Answer

The moral hazard problem arises when one party in a transaction has an incentive to take undue risks or shirk responsibilities because the cost of those actions does not fall on them. In the context of employment, when workers are imperfectly monitored, they may be tempted to shirk their responsibilities because they do not bear the full consequences of their reduced productivity, which exemplifies the moral hazard problem.

The Temptation of Imperfectly Monitored Workers to Shirk Their Responsibilities