Which practice would indicate that an employer is trying to overcome a moral hazard problem with respect to her employees
A)The employer pays wages to her workers that are unusually high for the industry and region.
B)The employer has voluntarily removed video cameras from the factory floor.
C)The employer has discontinued the practice of giving year-end bonuses to her employees.
D)The employer has hired a mediator to resolve union grievances.

Question

Quizplus · Accepted Answer

Offering unusually high wages to employees is one way to reduce moral hazard because it incentivizes employees to work harder and be more productive, reducing the likelihood that they will engage in risky or unethical behavior. It also signals that the employer values her employees and wants to create a positive work environment. Removing video cameras or discontinuing bonuses would not necessarily address a moral hazard problem, and hiring a mediator is more relevant in the context of resolving disputes or conflicts between management and labor.

Which Practice Would Indicate That an Employer Is Trying to Overcome