In Insurance Markets, Moral Hazard Occurs When the Behavior of

question 186

Multiple Choice

In insurance markets, moral hazard occurs when the behavior of

• A) the insured person changes in a way that raises costs for the insurer, since the insured person no longer bears the full costs of that behavior.
• B) the insurer changes in a way that raises costs for the insured person, since the insurer no longer bears the full costs of that behavior.
• C) the insured person changes in a way that eliminates rising health care costs for the insurer, since the insured person no longer bears the full costs of that behavior.
• D) the insured person has an incentive to under consume medical services, simply because the insured person no longer bears the full cost of medical services.

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Definitions:

Regulations

Rules or directives made and maintained by an authority to regulate behavior; they can apply to individuals, industries, and organizations.

Functional Structures

An organizational structure where the company is divided into departments based on specific functions or roles, such as marketing, finance, or human resources, enhancing specialization and efficiency.

Organic

Pertains to living systems or compounds containing carbon, or in business, refers to growth achieved through internal processes.

Formal

Following or conforming to established rules, conventions, or ceremonies.