A Moral Hazard

question 49

Multiple Choice

A moral hazard

• A)refers to the private, self-interested actions that people pursue, which, when taken collectively, lead to a loss in economic surplus.
• B)refers to the situation where people tend to take risks after they have entered into a transaction because they know the costs will be borne by the other party in the transaction.
• C)refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.
• D)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:

Automatic Renewals

Contract clauses that allow agreements to continue for a new term unless specifically canceled by one party.

Law on the Promotion

Legislation enacted to support and encourage certain activities, industries, or practices within a legal jurisdiction for economic or societal benefits.

Leasehold Estate

The leased property.

Premises

Land and the buildings on it, referred to especially in the context of business or law.