question archive Let's assume a professor guarantees that no one would fail the course if they didn't hand in the exam
Let's assume a professor guarantees that no one would fail the course if they didn't hand in the exam
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Let's assume a professor guarantees that no one would fail the course if they didn't hand in the exam. What kind of problem would the policy likely lead to?
a) Adverse selection
b) Moral hazard
c) Information asymmetry
d) None of the above
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- The correct option is b) - Moral Hazard.
Here, it is given that the professors guarantee that no one will fail in the examination; therefore, in this case, students will tend to study less as they know that they will pass the exam even without studying for it. Hence, the students will take more risk, know that the professor will not be going to fail them in the exams.
