________ arises when one party to a contract changes behavior in response to that contract, passing the cost of that change in behavior to the other party.
A) Adverse selection
B) Moral hazard
C) Logrolling
D) Market signaling

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party in a contract alters their behavior after the contract is signed in a way that passes risks or costs to the other party, often because they are insulated from the consequences of their actions by the contract itself.

________ Arises When One Party to a Contract Changes Behavior