Suppose a law firm purchases additional insurance against theft, and as a result, the partners are not very careful about locking their office doors when they leave. This is an example of

Question

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Moral hazard occurs when people alter their behavior as a result of having insurance or some other type of protection. In this case, the law firm's partners may feel less inclined to lock their office doors because they have additional insurance against theft. This may increase the likelihood of theft occurring because the partners are not taking the necessary precautions to prevent it.

Suppose a Law Firm Purchases Additional Insurance Against Theft, and as a Result