One Way of Reducing the Moral Hazard Problem in the Automobile

question 11

Multiple Choice

One way of reducing the moral hazard problem in the automobile insurance market is for drivers to

• A) carry high deductibles.
• B) carry no deductibles.
• C) all have good driving records.
• D) never make any claims.

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Definitions:

Budget

An estimate of income and expenditure for a set period, often used by governments, businesses, and individuals to plan financial operations.

Bananas

A staple fruit globally known for its yellow peel and soft, sweet flesh, often grown in tropical regions.

Productive Resources

The inputs used in the production of goods and services, typically classified as land, labor, capital, and entrepreneurship.

Economists

Professionals who study, develop, and apply theories and concepts from economics and write about economic policy.