Question

Christopher works for Ocean Media Inc., a large corporation. His work requires him to travel extensively and, as a result, he spends much time working remotely. Taking advantage of the situation, Christopher often works on personal projects instead of company projects. Ocean Media has difficulty checking on Christopher's work because he has no supervision in many of the places where he travels. This scenario exemplifies a(n)A. moral hazard.B. inverse selection.C. poison pill.D. outside director.

Answer 1

Answer:

A. moral hazard

Explanation:

Moral hazard is the risk that arises when an individual or entity entrusted with any obligation and cushioned from any liabilities arising from the discharge of the obligation acts negligently.  It is evident where an insured individual acts with no caution since they know that any loss arising is covered by the insuring company. Christopher takes advantage of the non-supervisory nature of his job and acts negligently, by working on personal projects, as any loss by Ocean Media Inc. is not a loss on Christopher, taking advantage of the goodwill expected of him.