Which of the Following Is an Example of Moral Hazard

question 18

Multiple Choice

Which of the following is an example of moral hazard?

• A)After Karabo buys fire insurance, he begins to smoke cigarettes in bed.
• B)None of these answers demonstrate moral hazard.
• C)Martin has been feeling poorly lately so he seeks health insurance.
• D)Both of Susan's parents lost their teeth due to gum disease, so Susan buys dental insurance.
• E)All of these answers demonstrate moral hazard.

---

Definitions:

Capital Budgeting

The process by which a business evaluates and selects long-term investment projects.

Cash Flows

The total amount of money being transferred into and out of a business, affecting the liquidity and overall financial health of the company.

Capital Budgeting

The process through which a company evaluates and selects long-term investments that are worth more than their cost to pursue.

Long-Term Projects

Long-term projects involve commitments or investments that span several years, focusing on achieving objectives that contribute to a company's growth or development.