For moral hazard to exist, there needs to be ...

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party has asymmetric information or knowledge compared to another party. Therefore, there needs to be an asymmetry of information for moral hazard to exist. Option A is incorrect because symmetry of information means that both parties have the same information, which would prevent moral hazard. Option C is not directly related to moral hazard but rather to the ability to enforce contracts. Option D is incorrect because there must be some form of informational imbalance for moral hazard to occur.

For Moral Hazard to Exist, There Needs to Be