Which of the following explains why moral hazard often arises in the workplace?
A)Employees do not directly benefit from their effort, but rather their time spent at work.
B)Employees receive the same compensation no matter the effort put forth.
C)Employees are hesitant to work their hardest for fear that will become the expectation.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

All of these statements contribute to the concept of moral hazard in the workplace. Moral hazard occurs when there is a lack of incentive to guard against risk where one is protected from its consequences. In the context of the workplace, this can manifest as employees not putting forth their best effort because they do not directly benefit from their hard work (A), they receive the same compensation regardless of effort (B), or they fear that high effort will set a new, higher expectation for their performance (C).

Which of the Following Explains Why Moral Hazard Often Arises