​An Example of Moral Hazard Is

question 82

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 more than a per hour worker
• C)an hourly salesman working harder than a commission salesman
• D)​an author on contract going to fewer book signings as one with a percentage royalty rate 

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Definitions:

Differential Cost

The difference in total cost that will result from selecting one alternative over another in decision-making.

Product Costs

Costs that are directly associated with the production of goods or services, including direct materials, direct labor, and manufacturing overhead.

Period Costs

Expenses that are not directly tied to the production of goods and are therefore expensed in the period they occur, such as selling and administrative expenses.

Variable Cost

Costs that vary directly with the level of production or service delivery.