In the market for automobile insurance, moral hazard implies that
A) those who are insured might take greater risks.
B) those who are uninsured might take greater risks.
C) insured and uninsured alike will take greater risks.
D) drivers with greater risks are more likely to buy insurance.

Question

Quizplus · Accepted Answer

Moral hazard in insurance refers to the tendency of individuals who are insured to take greater risks because they do not bear the full cost of those risks, knowing that the insurance will cover potential losses.

In the Market for Automobile Insurance, Moral Hazard Implies That