An Example of Moral Hazard Is

question 30

Multiple Choice

An example of moral hazard is

• A)people drive as carefully in icy conditions with antilock brakes as without
• B)people drive as safely with more airbags as without
• C)football players 'spear' with their heads when tackling more often with safer helmets
• D)people read the medicine warnings as carefully when self-medicating versus with a doctor's prescription

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor.

Contribution Margin

The selling price per unit, minus the variable cost per unit, used to determine the profitability of products or services.

Fixed Costs

Business expenses that remain constant regardless of the level of goods or services produced.

Fixed Costs

Costs that do not change with the level of production or sales over a certain period, such as rent or salaries.