Which of the following best demonstrates the problem of moral hazard?

Question

Quizplus · Accepted Answer

Moral hazard refers to the idea that individuals may take greater risks or act in a more reckless manner when they are protected from the consequences of their actions. In this case, Sally drives more recklessly after buying car insurance because she knows that the insurance company will cover the cost of any accidents or damage. This behavior represents moral hazard, as Sally is taking more risks than she otherwise would because of the insurance coverage. Choices A, B, and D do not demonstrate the problem of moral hazard.

Which of the Following Best Demonstrates the Problem of Moral