In 2012, Hewlett-Packard Co. announced that its new chief executive, Meg Whitman, would receive a salary of $1 and about $16.1 million in stock options, which are valuable if the stock does well (https://marketwatch.com, February 3, 2012). How would you feel about this compensation package if you were a shareholder? What are the implications for moral hazard, efficiency, and risk-sharing? Question Four (Contract choice) Used cars receive lower prices if they were rental cars than if they were owned by individuals. Does this price difference reflect adverse selection or moral hazard? Could car rental companies reduce this problem by carefully inspecting rental cars for damage when renters return such cars? Why do car companies normally do only a cursory inspection?