2) Consider the Moral Hazard model from the lecture: The firm has access to a risky project. The firm needs an amount of /to finance the project. The project yields with probability O sps 1 and 0 with 1 -p. If the entrepreneur shirks the project yields R with probability p = pz instead of p = Ph. Call Ap = pH-PL. The entrepreneur has private benefits from shirking of B. Sharing rule of profit between lenders, R., and borrowers, Rb: R = R + Ro Interpret how an increase in the success rate in case the manager is behaving, PH affects PH agency cost Ap. Provide the intuition for the result. (15 marks) B 3) Pick a recent case of moral hazard (e.g. Wirecard, Diesel scandal at WW, Daimler Chrysler etc.) and describe to which extent the theory from the lecture helps to explain the case. Analyse which stakeholders of the company were affected how and finally provide policy advice for how this type of Moral Hazard can be prevented going forward (you may also argue and conclude that there is nothing for the policy maker to do). (40 marks)