Moral Hazard Can Be Reduced By

question 47

Multiple Choice

Moral hazard can be reduced by:

• A)the use of 100% insurance coverage.
• B)imposing a deductible on insurance coverage.
• C)taking away personal stakes for people with private information.
• D)offering fewer incentives to people with private information to act in a less risky manner.

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Definitions:

Overhead Costs

Expenses not directly tied to the production of goods or services, such as rent, utilities, and office supplies.

Supervising Activity

An oversight function involving the monitoring and direction of resources, processes, or employees to achieve organizational objectives efficiently.

First Stage Allocations

The process of assigning indirect costs to different departments or cost centers within a business.

Equipment Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting the decrease in value due to use, wear and tear, or obsolescence.