Explain How Moral Hazard Could Arise in the Following Situations

question 103

Essay

Explain how moral hazard could arise in the following situations.
a. The federal government offers flood insurance for homes.
b. An NBA (National Basketball Association) player signs a long-term guaranteed contract.
c. The government lengthens the time to collect unemployment benefits from 26 to 99 weeks.
d. In an area where the roads are frequently snow-covered and icy, a person trades in her rear-wheel drive sports car for a four-wheel-drive SUV.

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Definitions:

Entrepreneurial Success

The achievement of desired goals by an entrepreneur, such as innovation, market impact, profitability, and expansion of the business.

Autonomy

the degree or condition of having the freedom to act independently or self-govern without external control.

Feedback

The information given to individuals or groups about their performance or behavior, intended to guide future improvements or maintain successful practices.

Gut Instinct

An intuitive feeling or response lacking a rational basis, often guiding personal decision making.