Identify the Principal, the Agent and the Moral Hazard Inherent

question 25

Essay

Identify the principal, the agent and the moral hazard inherent in each of the following situations.
a.In order to reduce personal injury claims, insurance companies successfully lobby legislators to pass laws requiring the use of seatbelts in automobiles.
b.A university provides free employee health insurance, which reduces the direct cost to the faculty and staff of visiting the doctor and the dentist.

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Definitions:

Carpometacarpal

Joints located at the base of the carpal bones of the wrist and the metacarpal bones of the hand, allowing for the movement between the wrist and the base of the fingers.

Atlanto-occipital

Relating to the joint between the atlas (first cervical vertebra) and the occipital bone of the skull, allowing for nodding and head rotation movements.

Hyperextension

An excessive straightening movement of a limb or body part beyond its normal range of motion, often resulting in injury.

Extension

A movement that increases the angle between body parts, typically referring to a joint or limb.