​An Example of Moral Hazard Is

question 30

Multiple Choice

​An example of moral hazard is

• A)​people drive as carefully in icy conditions with antilock brakes as without
• B)people drive less safely with more airbags than without
• C)football players avoid 'spearing' with their heads even with safer helmets
• D)​people read the medicine warnings as carefully when self-medicating as with a doctor's prescription

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Definitions:

Government Subsidy

Financial assistance provided by the government to businesses, individuals, or other governmental units in support of an activity deemed beneficial to the public.

Supply

The total amount of a product or service that is available to consumers, determined by factors such as price, production costs, and market demand.

Allocative Efficiency

A state of the market where resources are allocated in a way that maximizes the net benefit to society, ensuring that every good or service is produced up to the point where the last unit provides a benefit equal to its cost of production.

Productive Efficiency

A situation where the economy or a production process is unable to produce more of one good without reducing the production of another good, using available resources in the best way.