Moral hazard is ________ in employment settings because _______.
A) common; employee effort is easy to observe
B) common; employee effort is difficult to observe
C) uncommon; employee effort is easy to observe
D) uncommon; employee effort is difficult to observe

Question

Quizplus · Accepted Answer

Moral hazard is common in employment settings because employee effort is difficult to observe. Moral hazard arises when employees engage in risky behavior because they do not bear the full costs of the consequences of their actions, and this is particularly a problem in situations where it is difficult or costly to monitor employee behavior. Thus, employers often use incentives or monitoring mechanisms to mitigate the risk of moral hazard in their employment relationships.

Moral Hazard Is ________ in Employment Settings Because _______

Moral Hazard Is __ in Employment Settings Because _