Moral Hazard

question 63

Multiple Choice

Moral hazard:

• A)increases the ability of markets to allocate risk efficiently.
• B)decreases the ability of markets to allocate risk efficiently.
• C)has no impact on the ability of markets to allocate risk efficiently.
• D)encourages the provision of 100% insurance coverage.

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Definitions:

Effective Punishment

A punishment that reduces the likelihood of the behavior it follows occurring again, by being immediate, consistent, and proportionate.

Fear Stimulus

Any object, situation, or event that elicits a fear response, either through learned experience or innate reaction.

Extinction Procedure

The process in conditioning where the conditioned stimulus is presented without the unconditioned stimulus, leading to a decrease in the conditioned response over time.

Verbal Punishment

A behavior modification technique involving the use of negative verbal feedback to decrease undesirable behaviors.