Asked by

Sharqua Shaheen
on Dec 05, 2024

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Solutions to moral hazard include:

A) offering salespeople in stores a straight salary rather than a commission on sales.
B) setting up many stores and restaurants that are part of a national chain as franchises,with the owner undertaking quite a lot of risk.
C) allowing property owners to over insure their buildings.
D) diversification.

Moral Hazard

A situation where one party is more likely to take risks because the consequences of their actions are partly borne by others.

Straight Salary

A fixed amount of pay given to an employee, not dependent on the hours worked or performance.

Over Insure

The condition of having insurance coverage that exceeds the value of the insured item or risk, leading to unnecessary higher premium costs.

  • Master the understanding of moral hazard and its consequences on the behavior patterns of individuals and firms.
  • Identify solutions to mitigate the problems of adverse selection and moral hazard.
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Aniya MurphyDec 10, 2024
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