When a Moral Hazard Problem Exists for Automobile Driving, the Marginal

question 55

Multiple Choice

When a moral hazard problem exists for automobile driving, the marginal cost of driving:

• A) is lowered, and the amount of driving done is raised above the efficient level.
• B) is lowered, and the amount of driving done is lowered below the efficient level.
• C) is raised, and the amount of driving done is raised above the efficient level.
• D) is raised, and the amount of driving done is lowered below the efficient level.
• E) is raised above the efficient level, but market forces keep the total amount of driving is kept at the efficient level.

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