After John bought a more expensive car insurance, he started driving recklessly. This is an example of
A) market for lemons.
B) adverse selection.
C) moral hazard.
D) all of the above.

Question

Quizplus · Accepted Answer

This is an example of moral hazard, which occurs when one party in a transaction takes on more risk because they are protected in some way, in this case, by having more comprehensive car insurance.

After John Bought a More Expensive Car Insurance, He Started