Which of the Following Best Illustrates Moral Hazard

question 85

Multiple Choice

Which of the following best illustrates moral hazard?

• A)After a person obtains life insurance,she takes up skydiving.
• B)A person obtains insurance knowing he is in poor health.
• C)A person holds stock only in very risky corporations.
• D)A person holds stocks from only a few corporations.

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Definitions:

Depreciation Rate

The percentage or method used annually to allocate the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Salvage Value

The estimated residual value of an asset after the asset has reached the end of its useful life.

Equipment Purchase

The acquisition of physical assets like machinery, computers, or production tools for business operations, often involving capital expenditure.

Special One-Time Charge

A non-recurring expense or fee recorded in a company's financial statements, typically related to restructuring or significant adjustments.