Which of the Following Is a Problem of Moral Hazard

question 85

Multiple Choice

Which of the following is a problem of moral hazard?

• A) A lender cannot distinguish good risk from bad risk borrowers.
• B) An individual who purchases auto insurance begins to leave his or her keys in the car while running into a store.
• C) Life insurance companies offer an average premium to smokers and non-smokers so they do not have to have two different premiums.
• D) An auto insurance company charges higher premiums to younger drivers than what they charge to older drivers.

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Definitions:

Boredom

A state of feeling uninterested, weary, or impatient due to a lack of stimulation, excitement, or engagement.

Leaning Back

A posture where one inclines the torso backwards from a vertical or standing position, often for relaxation or balancing purposes.

Active Listening

The practice of fully concentrating, understanding, responding, and remembering what is being said in a conversation.

Communication Process

The act of conveying information and understanding between two or more individuals, encompassing the sender, message, medium, receiver, and feedback.