For a Liability to Exist

question 165

Multiple Choice

For a liability to exist:

• A)a past transaction or event must have occurred.
• B)the exact amount must be known.
• C)the identity of the party must be known.
• D)an obligation to pay cash in the future must exist.

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Definitions:

Moral Hazard

The situation where one party is more likely to take risks because the negative consequences of those risks will be felt by another party.

Asymmetric Information

Occurs when one party in a transaction has more or superior information compared to another, affecting decision-making.

Moral Hazard

A situation in economics and finance where one party takes more risks because another party bears the cost of those risks.

Auto Insurance

A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident or other vehicle-related damages.