Violet Has Automobile Insurance with Full Coverage and No Deductible

question 35

Multiple Choice

Violet has automobile insurance with full coverage and no deductible. As a result, Violet is a very careless driver. This is an example of:

• A) adverse selection.
• B) screening.
• C) moral hazard.
• D) asymmetric information.

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Definitions:

Salary Expense

The total amount paid to employees as salaries over a period of time, representing a liability for services received by the business.

Fees Payable

Liabilities or amounts owed by a company for services rendered by others, not yet paid at the balance sheet date.

Balance Sheet

An accounting document showing the worth of a company's assets, debts, and owner's equity on a particular date.

Asset

Resources owned by a business that have economic value and can provide future benefits.