Which of the Following Is Not an Example of Moral

question 80

Multiple Choice

Which of the following is not an example of moral hazard?

• A)Investment banks use 40-1 leverage, knowing that if the market collapses, the government will come to the rescue.
• B)Domestic automobile companies fail to design high-quality fuel-efficient cars, hoping that the government will save them if oil prices skyrocket.
• C)A backcountry skier takes an excessively dangerous run, knowing that local rescue crews will come to his aid if he gets in an accident.
• D)Insurance companies stopped offering insurance policies in New Orleans after a major hurricane, knowing the government will offer subsidies to draw people back.

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Definitions:

Net Income

The amount of profit a company has earned during a specific period, calculated as revenue minus expenses, taxes, and costs.

Additional Investment

Funds injected into a business by its owners or shareholders over and above the initial investment, typically to support operations, expansion, or growth.

Revenue Recognition

An accounting principle that outlines the specific conditions under which revenue is recognized and dictates how it should be reported in the accounts.

Production Process

The sequence of operations or procedures used to create finished goods from raw materials, typically involving planning, sourcing, manufacturing, and quality control.