(Solved):The fact that employees often take longer lunch breaks than they are supposed to is an example of the: a. principal-agent problem. b. moral hazard. c. adverse selection. d. a golden parachute. View Answer…

 

Question

The fact that employees often take longer lunch breaks than they are supposed to is an example of the:

a. principal-agent problem.

b. moral hazard.

c. adverse selection.

d. a golden parachute.

 

EXPERT ANSWER

The answer is b).

Moral hazard occurs when one party takes actions, which are unobservable to the other party, that are detrimental to the best interest of the other party. In this case, when employees take longer lunch breaks than they are supposed

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