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:

Contractual Arrangement

An agreement between two or more parties that creates enforceable obligations and rights for each party, often documented legally.

Foreign Firm

A company that is based, incorporated, or originates in a country different from the market it operates in or sells its products to.

Domestic Firm

A company that operates and conducts its business activities within its home country.

Legal Process

Involves the procedures and activities related to the law, including litigation, legal negotiation, and the enforcement of legal rights.