Moral Hazard

question 63

Multiple Choice

Moral hazard:

• A)increases the ability of markets to allocate risk efficiently.
• B)decreases the ability of markets to allocate risk efficiently.
• C)has no impact on the ability of markets to allocate risk efficiently.
• D)encourages the provision of 100% insurance coverage.

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Definitions:

Subscriptions Receivable-Common Stock

The amount owed to a company from subscribers who have committed to buy its common stock but have not yet paid.

Common Stock Subscribed

Temporary stockholders’ equity account that records at par value stock that has been subscribed to but not fully paid for.

Organization Expense

These are initial costs incurred in the process of starting a business, such as legal fees, state fees, and promotional expenses, which may be expensed or capitalized over time.

Common Stock

A form of corporate equity ownership, a type of security representing an ownership share in a corporation.