What Is Moral Hazard

question 90

Multiple Choice

What is moral hazard?

• A) It refers to the private, self-interested actions that people pursue, which, when taken collectively, lead to a loss in economic surplus.
• B) It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.
• C) It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.
• D) It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

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Definitions:

Long-Run Economic Prosperity

A state of economic health in a society, characterized by sustainability, growth, and a high standard of living over a long period.

Marginal Tax-Rate

The additional tax paid for every additional dollar earned as income, indicating the percentage of tax applied to your income for each tax bracket.

State And Federal Taxes

Taxes imposed by state and federal governments on individuals and businesses for various types of income, sales, property, and other activities.

Interest Income

The income earned by an individual or entity from the investment in interest-bearing financial assets like savings accounts, bonds, or loans.