An Example of Moral Hazard Is

question 12

Multiple Choice

An example of moral hazard is

• A)workers shirking when the boss is not looking
• B)health care insured dieting and exercising
• C)drivers of safer cars turning their phones off before driving
• D)borrowers investing their loan proceeds exactly as the bank requires

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Definitions:

Fixed Cost

Costs that remain constant in total regardless of changes in the level of production or sales activity.

Per Unit

A term used to denote the cost or price of a single item or measure of a service or product.

Relevant Range

The range of activity within which the assumptions about fixed and variable costs are valid for a specific business.

Mixed Costs

Expenses that have both fixed and variable components, changing with the level of production or sales activity but not in direct proportion.