Which of the Following Is a Problem of Moral Hazard

question 85

Multiple Choice

Which of the following is a problem of moral hazard?

• A) A lender cannot distinguish good risk from bad risk borrowers.
• B) An individual who purchases auto insurance begins to leave his or her keys in the car while running into a store.
• C) Life insurance companies offer an average premium to smokers and non-smokers so they do not have to have two different premiums.
• D) An auto insurance company charges higher premiums to younger drivers than what they charge to older drivers.

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Definitions:

BoardSource

An organization that specializes in providing support, resources, and training for nonprofit board officers and directors.

Finance Committee

A subgroup within an organization, typically composed of members of its governing body, responsible for overseeing financial policies, strategies, and health.

Financial Expert

A professional with extensive knowledge and skills in financial markets, investment strategies, and financial planning.

Organization's Investments

Relates to the allocation of resources by an organization into projects, assets, or initiatives with the expectation of achieving future benefits or returns.