Which of the Following Is an Example of Moral Hazard

question 93

Multiple Choice

Which of the following is an example of moral hazard?

• A)​There are likely more cars of low quality than of high quality offered for sale without warranties in the used car market.
• B)​An individual who eats well and exercises regularly chooses not to purchase health insurance.
• C)​An individual drives less cautiously after obtaining automobile insurance.
• D)​A car salesman offers a full warranty on a used car for 90 days.

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Definitions:

Preferences

In economics, the individual tastes or desires that dictate the choices made by consumers based on the satisfaction or utility they get.

Risk

The uncertainty as to the future returns of a particular financial investment or economic investment.

Occupational Segregation

The division of labor in which certain jobs are more frequently held by members of a particular gender, ethnicity, or race.

Crowding Model

is a theory suggesting that too much investment in a particular area can reduce its overall effectiveness or efficiency.