Moral hazard arises when principals find it costly to monitor agents.

Name: Moral hazard arises when principals find it costly to monitor agents.
Brand: Quizplus
Rating: 4.8 (51 reviews)

Question

Quizplus · Accepted Answer

Moral hazard occurs when there is a lack of monitoring or inability to observe the actions of an agent, leading to an increase in risky behavior or actions that do not align with the principal's goals. Thus, when monitoring is costly or difficult, it can contribute to the problem of moral hazard.

Moral Hazard Arises When Principals Find It Costly to Monitor