Jim Used to Be Very Careful with His Car

question 133

True/False

Jim used to be very careful with his car. However, once he bought full auto insurance on it, he stopped turning on his alarm or even locking it when parking it. This is an example of moral hazard.

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Definitions:

Mixed Costs

Expenses that have both fixed and variable components, changing in total with the level of activity but not in a directly proportional manner.

Selling and Administrative Expenses

Costs related to the selling of products and the managing of the company, excluding production costs.

Contribution Margin

The amount of revenue remaining after deducting variable costs, contributing towards covering fixed costs and generating profit.

Selling Price

The price the customer pays for a product or service.