The Problem That Arises When a Party That Is Protected

question 159

Multiple Choice

The problem that arises when a party that is protected from risk behaves differently than if it were not protected from risk is

• A) moral hazard.
• B) diminishing returns.
• C) the principal-agent problem.
• D) adverse selection.
• E) market failure.

---

Definitions:

Large-scale Privatization

The process of transferring ownership of large government enterprises to private entities.

Karl Marx

A 19th-century philosopher and economist known for his theories on capitalism and communism.

Private Enterprise

Business operations and ownership by private individuals rather than by the government, encouraging competition and innovation.

Communism

A political and economic ideology advocating for a classless society where all property is publicly owned and each person works and is paid according to their abilities and needs.