Reese has a tendency to get very bored while he is driving his car and falls asleep behind the wheel.He has decided to seek the maximum amount of car insurance that he can obtain.What does this situation reflect?

Question

Quizplus · Accepted Answer

This situation reflects the problem of moral hazard, where the insured party (Reese) has an incentive to engage in riskier behavior (falling asleep while driving) because the insurance company will cover the costs of any resulting damage or injury. Reese's decision to seek the maximum amount of car insurance suggests that he may be more likely to engage in risky behavior, knowing that he is protected by insurance.

Reese Has a Tendency to Get Very Bored While He