An Example of Moral Hazard Is

question 5

Multiple Choice

An example of moral hazard is

• A) a situation where high-quality loan applicants drive low-quality loan applicants out of the market for bank loans.
• B) a situation where equally qualified men and women do not earn the same wages in the same occupation.
• C) a situation where individuals are not willing to pay top dollar for a used car because they assume it is a lemon.
• D) a situation where a person purchases life insurance and then lives recklessly.

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Definitions:

Hedonist

A person who believes that the pursuit of pleasure or happiness is the most important goal in life.

Might-Equals-Right

A belief or principle that power and strength justify moral superiority or rightful authority.

Self-Serving

Behaviors or attitudes that prioritize an individual's own interests, benefits, or welfare over those of others.

Matched Power

A situation in negotiations or relationships where the power levels of the involved parties are equal, allowing for more balanced and fair outcomes.