Which of the Following Is Not an Example of Moral

question 248

Multiple Choice

Which of the following is not an example of moral hazard?

• A) a person with car insurance drives recklessly
• B) a pet-sitter being paid to walk a dog for one hour per day only walks the dog for 20 minutes per day
• C) a thief steals a car
• D) All of the above are examples of moral hazard.

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Definitions:

Premium

A payment to an insurance company in return for the promise to pay a claim in certain states of the world.

Insurance Company

A business entity that provides financial protection and compensation for losses to individuals and entities in exchange for premium payments.

Medical Bills

Expenses incurred for receiving medical treatment and health services.

Expected Value

In reference to a random variable, the weighted average of all possible values, where the weights on each possible value correspond to the probability of that value occurring.