An Example of Moral Hazard Is

question 15

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 jour worker
• C)an hourly salesman working less hard than a commission salesman
• D)an author on contract going to as many book signings as one with a percentage royalty rate

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Definitions:

Equilibrium Price

The price at which the quantity of a product offered for sale matches the quantity that consumers are willing to buy, without any leftover surplus or shortage.

Collusion

Collusion is an agreement among firms in a market to coordinate actions to achieve a higher price or market control, resulting in less competition.

Oligopolistic Producers

Companies within an industry where a small number of firms hold a large market share, leading to limited competition.

Homogeneous Product

Goods that are perfectly identical in quality, style, and substance, making them indistinguishable from products produced by competing companies.