Which of the Following Is an Example of Moral Hazard

question 86

Multiple Choice

Which of the following is an example of moral hazard?

• A)A college student drinking alcohol and partying instead of studying.
• B)A homeowner with fire insurance not clearing bush around their property.
• C)A chronically sick person using hospital services.
• D)A chronically sick person buying more health insurance than average.

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Definitions:

Preferred Mix

The optimal combination of goods and services chosen by an individual or firm based on preferences, income, and prices.

Productive Efficiency

Achieved when goods or services are produced at the lowest possible cost and utilizing resources in the best way possible.

Average Total Cost

The total cost of production divided by the quantity of output produced, showing the average cost per unit.

Technological Advance

Progress in technology that often leads to improvements in efficiency, productivity, and the development of new products.