The Problem of Moral Hazard Arises Because

question 44

Multiple Choice

The problem of moral hazard arises because

• A)life is full of all sorts of risks.
• B)after people buy insurance,they have less incentive to be careful about their risky behavior.
• C)a high-risk person is more likely to apply for insurance than is a low-risk person.
• D)insurance companies go to great effort to avoid paying claims to their policy holders.

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Definitions:

Sensitization

An increase in behavioral response after exposure to a stimulus.

Higher-order Conditioning

A form of conditioning in which a stimulus is paired with a previously conditioned stimulus, leading to the acquisition of the same conditioned response without being directly paired with the unconditioned stimulus.

Modeling

The process of learning behaviors by observing and imitating others, a key concept in social learning theory.

Dishabituation

The renewal of a response, previously habituated, due to the presentation of a novel stimulus.