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:

Stigma

A mark of shame or discredit, often attached to a certain condition, individual, or social identity, leading to exclusion or discrimination.

Overweight

A medical condition characterized by excess body fat, which may negatively impact health, determined by measures like Body Mass Index (BMI).

Cerebral Palsy

A neurological disorder caused by a non-progressive brain injury or malformation that occurs while the child’s brain is under development, affecting body movement and muscle coordination.

Homosexual Behavior

Sexual or romantic activities involving individuals of the same sex.