Moral hazard is
A) the tendency for people to enter into agreements in which they can use their private information to their own advantage and to the disadvantage of the less informed party.
B) when one of the parties to an agreement has an incentive after the agreement is made to act in a manner that brings additional benefits to himself or herself at the expense of the other party.
C) a situation in which only bad quality items are bought and sold.
D) an action taken outside a market that conveys information that can be used by that market.

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party in an agreement has an incentive to take risks or act in a way that is detrimental to the other party after the agreement has been made, often because they do not bear the full consequences of their actions.

Moral Hazard Is