Moral hazards are most likely to result from: A. Systems in which individuals AR

Question

Moral hazards are most likely to result from: A. Systems in which individuals ARE NOT motivated to do their best B. Systems in which individuals ARE motivated to do their best C. Low income tax rates D. Inability to distinguish right from wrong

Which statement describes a situation that potentially creates moral hazard?

Using sales commissions as compensation

Home Depot requiring substantial refundable deposits on rental yard equipment

Using grades (i.e., A, B, C, D, and F) to judge classroom performance

NOT using grades (i.e., A, B, C, D, and F) to judge classroom performance

Which of the following BEST describes the CAFE rules:

These rules require the use of certain emission control devices designed to reduce pollution.

These rules require the use of driver and passenger safety devices (i.e. seat belts and air bags).

These rules establish minimum fuel economy standards for each individual car model manufactured.

These rules establish minimum fuel economy standards for an entire manufactured fleet of automobiles.

Using sales commissions as compensation

Home Depot requiring substantial refundable deposits on rental yard equipment

Using grades (i.e., A, B, C, D, and F) to judge classroom performance

NOT using grades (i.e., A, B, C, D, and F) to judge classroom performance

Explanation / Answer

Answers:

1). Moral hazards are most likely to result from

Answer:Inability to distinguish right from wrong

2).Which statement describes a situation that potentially creates moral hazard?

Answer: NOT using grades (i.e., A, B, C, D, and F) to judge classroom performance

3). Which of the following BEST describes the CAFE rules:

Answer: These rules establish minimum fuel economy standards for each individual car model manufactured.

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