2. One source of market imperfection is asymmetric information. One problem that

Question

2. One source of market imperfection is asymmetric information. One problem that could arise as the result of asymmetric information is moral hazard. Discuss examples of moral hazard in your organization and what can be done to minimize it?

4. Property right, patent and copy right are prerequisites of economic growth. Discuss why this may be a concern for foreign firms operating in developing countries.

Justify your answers, ideas and reasoning by using appropriate examples and references. A typical answer should be more than 200 words but no more than 500 words.

Explanation / Answer

The examples of moral hazard in my organization are:

In order to solve the above issue, there must be variable pay component in their wages. The variable pay will be linked to the output by both sales and operations team. If they achieve higher than set goal, then the variable pay will be high. It will help to boost up the moral and in turn help the organization.

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