Stockholders of ComfortAir Corporation, an air conditioner and furnace manufacturer, are concerned that the companies executives may take on greater risks than stockholders desire. This example illustrates

The correct answer is letter "B": moral hazard and firm-specific risk.

Explanation:

A Moral Hazard is any risk a person takes when they will not have to suffer the consequences of the risk personally. Often, the term moral hazard occurs in an agency relationship typically when the agent takes advantage of the resources of the firm against the interest of the principal.  

Firm-specific risk refers to the risk that involves a firm alone and not the overall market where the entity handles its operations. Firm-specific risk is mostly called unsystematic risk.

Thus, if ComfortAir Corporation stakeholders are worried about managers taking too much risk than they desired, the situation represents a moral hazard and a firm-specific risk.

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