Consider the following two situations. Nicole accepts a job where she will be driving in dangerous traffic, so she seeks auto insurance. After Braden buys health insurance, he visits the gym less frequently. Which of these person's actions illustrates moral hazard?
A)both Nicole's and Braden's
B)Nicole's but not Braden's
C)Braden's but not Nicole's
D)neither Braden's nor Nicole's

Question

Quizplus · Accepted Answer

Moral hazard occurs when a person takes more risks because they are protected, such as Braden visiting the gym less after getting health insurance. Nicole seeking insurance due to dangerous traffic is not moral hazard; it's risk management.

Consider the Following Two Situations