Curt borrowed money from a bank to purchase a fishing boat.He purchased property insurance on the boat.Curt had difficulty making loan payments because he did not catch many fish,and fish prices were low.Curt intentionally sunk the boat,collected from his insurer,and paid off the loan balance.This scenario illustrates the problem of

Question

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This scenario illustrates moral hazard, where Curt intentionally sunk the boat to collect from the insurer, knowing that the bank would be paid off and he would not have to bear the consequences of his actions.

Curt Borrowed Money from a Bank to Purchase a Fishing