Man Ec: #15

Question 1

What is a moral hazard? definition

Answer 1

when one parties actions are hard to observe and impact the value of the exchange to other parties.

Question 2

shirk

Answer 2

seriously? this is putting off work

Question 3

principal-agent problem

Answer 3

the principal gives tasks to agent, then has to monitor the agent to make sure it gets done, which takes more work

Question 4

Team production

Answer 4

when a team makes a product

Question 5

residual claiment

Answer 5

this is the person who gets to collect the money left over after everyone is paid, which encourages the person to monitor people well so they are efficient and don’t shirk

Question 6

the incentive problem

Answer 6

this is the problem arising from determining how well agents are working especially because one worker shirking benefits them but the cost is spread cuz others have to pick up the slack.

Question 7

horizon problem

Answer 7

a manager may not take into account the costs and benefits that their decisions might have after they leave the company

Question 8

principle of risk sharing

Answer 8

this involves pooling money of individuals to share risk. So if you need a pay out today you can dip into the pot and when another needs one later they can etc.