Asked by Jo Anne De Leon on Sep 24, 2024
Verified
Economists disagree with constant government bailouts of large,struggling companies because it can give a rise to
A) Moral hazard
B) Adverse selection
C) Lazy managers
D) None of the above
Moral Hazard
A situation where one party is more likely to take risks because another party bears the consequences of those risks, often arising in insurance and finance contexts.
Government Bailouts
Financial support provided by the government to prevent the failure of a struggling company or industry, often to stabilize the economy and preserve jobs.
Struggling Companies
Firms that are facing financial difficulties or are unable to achieve desired business performance.
- Comprehend the principle of moral hazard, encapsulating its origins and effects.
- Analyze the impact of regulatory and policy measures on moral hazard and adverse selection.
Verified Answer
Learning Objectives
- Comprehend the principle of moral hazard, encapsulating its origins and effects.
- Analyze the impact of regulatory and policy measures on moral hazard and adverse selection.
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