Which of the Following Is (Are) Examples of Moral Hazard

question 73

Multiple Choice

Which of the following is (are) examples of moral hazard?
I. An unemployed worker reduced his effort to find a job after he became eligible for unemployment insurance.
II. Banks make exceptionally risky investments because they expect government bailouts if their investments fail.
III. After a university made the morning-after pill available on campus, more students became sexually promiscuous.

• A) I, II, and III
• B) I
• C) II
• D) I and II

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Definitions:

Income Taxes

Taxes imposed by the government on the income generated by individuals or companies.

Initial Investments

The upfront sum of money invested in a project, business, or asset to start its operation.

Income Taxes

Taxes imposed by governments on the income generated by businesses and individuals within their jurisdiction.

Income Tax Expense

The total amount of income tax a company is obligated to pay to the government, reported as an expense in the income statement.