Which of the Following Actions Best Illustrates Moral Hazard

question 115

Multiple Choice

Which of the following actions best illustrates moral hazard?

• A)A person adds risky stock to his portfolio.
• B)A person who has narrowly avoided many accidents applies for automobile insurance.
• C)A person is unwilling to buy a stock when she believes its price has an equal chance of rising or falling $10.
• D)A person purchases homeowners insurance and then checks his smoke detector batteries less frequently.

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Definitions:

Hemophilia

A rare genetic disorder where the blood's ability to clot is severely reduced, causing excessive bleeding from even slight injuries.

Royal Families

Families that belong to a royal lineage, often ruling over a monarchy and carrying titles of nobility.

Sex-Linked Recessive Trait

A genetic trait located on the sex chromosomes that is expressed in individuals with two copies of the allele, often manifesting more frequently in males.

Hemophiliac Male

A male individual with hemophilia, a genetic disorder that impairs the blood's ability to clot, leading to prolonged bleeding from minor injuries.