​An Example of Moral Hazard Is

question 83

Multiple Choice

​An example of moral hazard is

• A)​A taxi driver paid per mile taking the shortest route
• B)a piece-rate garment worker shirking less than a per hour worker
• C)an hourly salesman working harder than a commission salesman
• D)​an author on contract going to as many book signings as one with a percentage royalty rate 

---

Definitions:

Falling Costs

A situation where the expenses associated with producing a good or service decrease, often leading to lower prices for consumers.

Economies of Scale

The cost advantage that arises with increased output of a product, where average costs start to fall as production scales up.

Marginal Returns

denotes the additional output obtained by adding one more unit of a specific input, while keeping other inputs constant.

Diseconomies of Scale

The scenario where costs start increasing as a company or project becomes too large, leading to inefficiency.