Moral hazard is the risk that the existence of a contract will change the behaviors of parties to the contract.

Question

Quizplus · Accepted Answer

Moral hazard refers to the potential for one party to take risks because they know that the other party will bear the costs of those risks. This can arise when contracts are in place, as parties may alter their behavior to take advantage of the contractual terms or protections. Therefore, the statement is true.

Moral Hazard Is the Risk That the Existence of a Contract