In the Insurance Business, the Moral Hazard Problem Arises When

question 69

Multiple Choice

In the insurance business, the moral hazard problem arises when

• A)not-so-healthy people are the ones more eager to buy insurance.
• B)people with unhealthy lifestyles buy more insurance coverage.
• C)people who have car-insurance coverage drive less carefully.
• D)people do not get sufficient car-insurance coverage.

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Definitions:

Salvage Value

The estimated residual value of an asset at the end of its useful life, determining how much the asset can be sold for.

Book Value

The book value of an asset is its original cost minus any accumulated depreciation, representing its recorded value in the financial statements.

Land Improvements

Enhancements made to land, like landscaping or parking lots, that increase the property's value but have a finite, depreciable life.

Purchase Price

The amount of money paid to buy a good or service.