Which of the following is not an example of a principal trying to solve the moral-hazard problem?
A) the principal conducts an extensive interview of the agent
B) the principal installs hidden cameras to monitor the agent's behavior
C) the principal pays the agent efficiency wages
D) the principal pays the agent a year-end bonus

Question

Quizplus · Accepted Answer

Conducting an extensive interview is a method to screen potential agents before hiring, not a method to solve the moral-hazard problem, which involves monitoring or incentivizing behavior after hiring.

Which of the Following Is Not an Example of a Principal