You insure your car against theft. Consequently, you rarely lock the car. This describes the problem of:
A) adverse selection.
B) moral hazard.
C) positive correlation.
D) risk aversion.

Question

Quizplus · Accepted Answer

Moral hazard occurs when an individual takes more risks because they do not bear the full consequences of those risks, often due to having insurance coverage. In this case, the car owner is less cautious about locking the car because they have insurance against theft.

You Insure Your Car Against Theft